Salzer Electronics Ltd. — Interim / Quarterly Report 2022

May 22, 2022

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Salzer Electronics Limited Result Update Presentation

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Q4 & FY22

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Disclaimer

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This presentation has been prepared by Salzer Electronics Limited (the “Company”) solely for information purposes and does not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company.

This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded.

Certain matters discussed in this Presentation may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability to successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation. The Company assumes no obligation to update any forwardlooking information contained in this Presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statements and projections.

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Table of Contents

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Financial Highlights

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Joint Managing Director’s Message

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“The impacts of the third wave of the pandemic are subsiding now, as markets in India and abroad are recovering from the slowdown. We are witnessing a steady growth in demand and an increasing good orderbook, from both domestic as well as export markets.

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Commenting on the results, Mr. Rajesh Doraiswamy, Joint Managing Director, said :

During the fourth quarter of the financial year, we registered a revenue of Rs. 228.02 crores with EBITDA and PAT of Rs. 12.89 crore and Rs. 3.83 crore, respectively. Growth came in primarily from industrial switchgear products. Continued volatility in raw material prices, substantial freight cost Increase has offset our price hikes and impacted margins. We are slowly passing on these hikes to our customers in time. However, going forward, we expect raw material prices to stabilize now and margins to improve slightly. Moreover, one-time expenses for new product development also dented margins.

I am happy to share that we recently received two patents – one for integrated cam operated rotary switches, which is a legacy product contributing substantially to our top line, and another for MPCB. Such developments help protect our intellectual property and boost our efforts in R&D and product development.

On another note, our recent joint ventures to enter the electric vehicles space are both on track. We are excited about this line of business as it is a high growth potential vertical, and we have strong technical alliances in the form of these JVs to get an early start in the market.

Going into the next fiscal, we expect to maintain our growth trajectory with our strong product offerings and brand position in the market. Based on domestic and export outlook, we are cautiously optimistic about the overall business performance.

I thank all our stakeholders for their continued support and faith in our Company and wish everyone good health.”

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Key Financial Highlights – Quarterly

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Revenue, EBITDA, PAT (Rs. Crore)

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Revenue EBITDA PAT
250 30.0
228.0
211.8
194.8 25.0
200 189.7
170.4
162.1
155.0 18.8 18.4 20.0
143.5 17.5 149.8 17.3 149.0 17.7
150 16.4 134.716.7 16.1 16.9 16.7 137.8 134.716.7 132.3 16.2
126.8 126.5
14.8
14.3
14.0
15.0
12.9
95.7
100
9.6
9.1
8.4 10.0
7.0 7.5 7.3
6.6 6.4
5.6 5.4 5.8 5.9 5.5
50 4.9 4.5
4.0 3.8 5.0
0.7
0 0.0
Q4 FY18Q1 FY19Q2 FY19Q3 FY19Q4 FY19Q1 FY20Q2 FY20Q3 FY20Q4 FY20Q1 FY21Q2 FY21Q3 FY21Q4 FY21Q1 FY22Q2 FY22Q3 FY22Q4 FY22
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Q4 FY22 Financial Highlights

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Rs. in Crore	Standalone	Standalone	Standalone	Standalone	Consolidated
	Q4 FY22	Q4 FY21	Y-o-Y %	Q3 FY22	Q4 FY22
Net Revenue	228.02	189.69	20.21%	211.82	238.87
Raw Materials	185.55	150.83		167.62	192.82
Employee Cost	8.60	7.50		7.35	9.62
Other Expenses	20.97	15.20		19.17	22.51
Total Expenditure	215.13	173.53		194.14	224.96
EBITDA	12.89	16.16	(20.26%)	17.68	13.91
EBIDTA Margin(%)	5.65%	8.52%	(287 bps)	8.35%	5.82%
Other Income	0.35	1.44		0.88	0.53
Depreciation	4.05	4.09		3.93	4.13
Interest / Finance Cost	5.02	5.26		4.97	5.04
Exceptional Item(Gain)/ Loss	0.00	0.00		0.00	0.00
Profit Before Tax	4.16	8.25	(49.54%)	9.66	5.27
Tax	0.34	1.26		2.41	0.70
Profit After Tax	3.83	6.99	(45.25%)	7.25	4.57
Profit After Tax Margin(%)	1.68%	3.68%	(200 bps)	3.42%	1.91%
Basic EPS(Rs.)	2.39	4.37	(45.31%)	4.53	2.03

▪ Increase in Revenue driven by higher volumes and price increase, especially in Switchgear segment

• Contribution from Exports was 20.43% , on account of increase in sales to the Americas, Middle East, Africa and Europe. Overall export revenue grew 22.5% YoY in Q4

▪ One-time product development costs had impact on margins

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Q4 FY22 Revenue Breakup – Business Verticals

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Q4 FY21 Q4 FY22
Industrial
Switchgear,
48.1%
Industrial
Switchgear,
41.31%
Energy
Management ,
Wire & Cable,
0.00%
52.46%
Building Segment,
Building Segment, 7.3%
Wire & Cable,
6.23%
44.6%
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▪ Industrial Switchgear – 48.12% of net revenues

▪ Wires & Cables – 44.63% of net revenues

▪ Buildings Products – 7.25% of net revenues

▪ Energy Management – No tenders issued by the Government during this period

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Q4 FY22 Revenue Breakup – Geographical

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Q4 FY21
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Q4 FY22
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Middle East,
Asia (Exclu. India),
North/South 10.8% 1.5%
America, 3.1%
Europe,
4.7%
India,
80.0%
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Asia (Exclu. India),
Middle East, 2.2%
North/South 7.6%
America, 4.7%
Europe,
5.9%
India,
79.6%
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FY22 Financial Highlights

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Rs. in Crore	FY22	FY21	Y-o-Y %	FY22 (Consl)
Net Revenue	783.63	605.62	29.39%	803.54
Raw Material Expenses	621.79	470.39		630.17
Employee Expenses	29.40	24.34		33.60
Other Expenses	68.66	49.10		73.54
Total Expenditure	719.85	543.83		737.30
EBITDA	63.78	61.79	3.22%	66.24
EBITDA Margin(%)	8.14%	10.20%	(206 bps)	8.24%
Other Income	2.18	1.99		2.48
Depreciation	16.01	15.61		16.33
Interest/Finance Cost	19.81	21.27		19.88
Exceptional Item(Gain) /Loss	0.00	0.00		0.00
PBT	30.15	26.90	12.07%	32.51
Tax	7.67	6.23		8.30
PAT	22.48	20.67	8.75%	24.20
PAT Margin(%)	2.87%	3.41%	(54 bps)	3.01%
Basic EPS(Rs.)	14.07	12.93	8.82%	14.14

▪ Strong demand for industrial switchgear products, particularly wire harnesses and 3 phase dry type transformers

▪ Contribution from exports was 23.29% in FY22, mainly from higher exports to Middle East Africa , European, American and Asia markets

▪ Volatility in raw material prices and freight charges offset impact of price hike of finished goods

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FY22 Revenue Breakup – Business Verticals

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FY21 FY22
Industrial
Switchgear,
50.3%
Industrial
Switchgear,
41.3%
Energy
Management ,
Wire & Cable,
0.5%
52.8% Building Segment,
Building Segment, 6.5%
5.4% Wire & Cable,
43.2%
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▪ Industrial Switchgear – 50.25% of net revenues

▪ Wires & Cables – 43.23% of net revenues

▪ Buildings Products – 6.52% of net revenues

▪ Energy Management – No tenders issued by the Government during this period

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FY22 Revenue Breakup – Geographical

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FY21
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FY22
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Middle East,
Asia (Exclu. India),
North/South 1.3%
9.4%
America, 4.0%
Europe,
5.3%
India,
80.0%
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Asia (Exclu. India),
Middle East, 1.4%
9.7%
North/South
America, 5.2%
Europe,
7.0%
India,
76.7%
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Balance Sheet as on 31[st] Mar’ 22

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Rs. Crore	As on 31st Mar’ 22	As on 31st Mar’ 21		Rs. Crore	As on 31st Mar’ 22	As on 31st Mar’ 21
Shareholder’s Funds	351.47	331.29		Non-current assets	261.15	260.14
Share capital	15.98	15.98		Property,Plant & Equipment	210.57	206.66
Other Equity	335.48	315.30		Capital WIP	0.78	1.35
				Investments Property	0.01	0.01
Non ControllingInterest	0.00	0.00
				Intangible Assets	3.86	4.10
Non-current liabilities	32.01	35.03
				FA - Investments	17.45	17.26
Financial Liabilities
				FA - Trade Receivables	11.63	11.60
Borrowing	12.41	16.27
				FA - Others	11.83	17.27
Provisions	0.00	0.03
				Other Non Current Assets	5.02	1.89
Deferred Tax Liabilities(Net)	19.61	18.74
				Current assets	480.64	414.09
Other Non-Current Liabilities	0.00	0.00
				Inventories	223.70	177.38
Current liabilities	358.31	307.91
				Financial Assets
Financial Liabilities
				Investments	3.10	3.90
Borrowing	235.40	197.48
				Trade receivables	208.52	178.46
Trade Payable	73.77	58.81
				Cash & Cash equivalent	1.28	4.93
Others	4.86	4.89
				Bank Balance other than above	6.76	5.57
Other Current Liabilities	42.59	44.07
				Loans	10.58	18.41
Provisions	1.70	1.30
				Other	0.35	0.34
Current tax liability (Net)	0.00	1.36		Other Current Assets	26.35	25.10
Total Equities & Liabilities	741.79	674.23		Total Assets	741.79	674.23

Board has recommended dividend at the rate of 18% i.e. Rs. 1.80 per equity share of Rs. 10 each subject to shareholders approval

*Consolidated – on account of acquisition of 74.9% shares of Kaycee Industries

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Key Financial Highlights – Annual

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EBITDA (Rs. Crore) / Margins (%)

Revenue (Rs. Crore)

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70 12.0% 11.5% 10.2% 14%
11.4%
60 12%
50 8.1% 10%
40 8%
30 63.6 65.2 61.8 63.8 6%
53.3
20 4%
10 2%
0 0%
FY18 FY19 FY20 FY21 FY22
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783.6
605.6
559.8 566.9
442.8
FY18 FY19 FY20 FY21 FY22
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Net Profit (Rs. Crore)

Networth as on 31[st] March (Rs. Crore)

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351.47
331.3
309.4
287.0
270.6
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30 4.5% 4.7% 5%
4.3%
25 3.4%
4%
20 2.9%
3%
15
26.4
24.0 2%
22.5
10 20.0 20.7
1%
5
0 0%
FY18 FY19 FY20 FY21 FY22
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FY18
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FY19
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FY20
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FY21

FY22

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Company Overview

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About Us

Leading player offering total and customized electrical solutions

• Presence in Industrial Switchgears, Wires

• & Cables and Energy management

business

• Largest manufacturer of Cam Operated

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Wide Distribution network – local and global

• Own distribution network – local and global

  • export to 50 countries

• Access to L&T’s local network through more than 350 distributors

• Rotary Switches – Market leader with 25% share

Extensive Product portfolio across verticals with In-house manufacturing facilities

• Five manufacturing units located in Tamil Nadu

• More than 15 products catering to Industrial / Building / Automobile verticals

Strong focus on product development and innovation

• Registered Patent for Rotary Switches, five product patents in process

• Receives patent for ‘Integral Cam Operated Rotary Switches’ for a duration of 20 years, ending 2031

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From a Single Product Company…

• Unit I (Coimbatore) – manufacture contactors, relays, panels, energy savers

• Starting of long term association with L&T

• Technical collaboration with Plitron for manufacture of Toroidal Transformers

• 1st Indian company to bring technology to India

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• Leading player offering total and customized electrical solutions

• More than 15 different products

• 2,000 employees

• 5 manufacturing units

• Foray into tailor made products and branding for large customers

• Specialized panels for OEMs

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1985 1991-95 2001-06
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2010-14 2017-22
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▪ Established to

manufacturer of CAM operated Rotary Switches

• Unit III - manufacture modular switches

• Started manufacturing of Wire & Cable for L&T

• Started commercial production of Three Phase Dry Type Transformers

• Acquired Salzer Magnet Wires

• Upgrade in Credit Rating for long-term borrowing to ‘CRISIL A/Stable’

• Acquired Kaycee Industries Ltd.

• Forays into EV Business through JVs with Kostad Steuerungsbau GmbH and EMarch LLP

• Receives patent for ‘Integral Cam Operated Rotary Switches’ for a duration of 20 years, ending 2031

… to manufacturing multiple products across sectors

• Receives patent for ‘Motor Protection Circuit Breaker With Increased Air Gap’ 17

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Professional Management

D. Rajeshkumar

R. Doraiswamy

Managing Director

Joint Managing Director

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• Qualified Electrical Engineer and Technocrat Entrepreneur with over 4 decades of experience

• Electrical Engineer, India; Postgraduate in Business Management, US

• Vast Experience in Foreign Collaboration & wide global contacts

• JMD and CEO of Company -

• responsible for driving the vision of Company

P. Sivakumar

M Laksminarayana

AVP – Marketing Corporate

VP - Operations

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  - B.E (Electrical) with over 2 decades of experience

• Bachelors in Engineering with over

• 3 decades of experience

• Responsible for Sales & Marketing division

• Responsible for Production, Planning, Inventory Management, Maintenance & General Administration

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S. Baskarasubramanian

Director-Corporate Affairs & CS

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• Qualified Company Secretary

• Wide experience in company law/ corporate affairs

D. Govindaraj

Sr. Manager-Corp. Accounts &

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Projects

• Masters in Commerce, DLL and DTL with over 3 decades of experience

• Responsible for project finance and corporate accounts

R Karunakaran

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GM - PR & GST

• BSc, Diploma in Marketing Management with more than 3 decades of experience

• Responsible for GST and Public Relations

of Company

Guided by 11-member experienced Board

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Business Overview

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Business Overview

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Industrial Switch Gear Products

• Transformers

• Terminal Blocks

• Rotary Switches

• Isolators

• General Purpose relays

• Wiring Ducts

• MPCB’s

• Contactors & OLR’s

• Control Panels

• Wire Harness

Building products

• Modular Switches

• Wires & Cables

• MCB’s

• Changeovers

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Copper Products

• Wires & Cables

• Flexible Bus Bars

• Enamelled Wires

• Bunched Conductors

• Tinned Copper Wires

Energy Management products

• Energy Savers

• Street Light Controllers

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Wide Product Suite- Customized for OEM’s

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CT’s
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Terminal Sockets

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Coils / Inductors

Panels

In-house manufacturing and R&D enables superior customization of products

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Key Strengths

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Wide Distribution Network

Complete Backward Integration

• In-house manufacturing facilities with process capabilities ensures better product development and customization

Strong Customer Relationships

• Strong customer relationships across globe

• Preferred supplier to GE, Schneider and only approved supplier of Nuclear Power Corporation

• Largest supplier of rotary and load break switches to Indian Railways

  • Wide distribution network – international and domestic

  • Tie up with L&T – access to over 350 dealers in India; own network for modular switches with 50 stockist in 4 southern & western states

  • Direct network across 50 countries with 40 international distributors

• Well developed R&D enables continual

• product innovation

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Advanced Engineering Capabilities

Wide Product Suite

• Amongst few players in India, to offer total & customized electrical solutions

• Wide product basket – 15 products developed in-house

• Largest manufacturer and market leader in CAM operated rotary switches

• Strong engineering capabilities backed by in-house manufacturing and R&D team

• Technical collaboration with Plitron for Toroidal transformers – 1st company to bring technology to India, Joint Venture with C3Controls for contactors and relays

• Resulting in all products been international certified and universal acceptance

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Five Manufacturing facilities...

UNIT 2

UNIT 3

UNIT I

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• Toroidal Transformers

• Rotary Switch

  • Wiring Accessories

• Isolators (Dis-connectors)

• Contactors & Relays

• Panel Assembly

• Terminals

• Lighting Energy

• Wiring Ducts

• Savers

• MPCB

• Automatic Meter Reading

• Wire Harness

• 3 PH Transformers

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UNIT 4

UNIT 5

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• Wires & Cables

• Enamelled Copper Wires

• Flexible Bus Bars

• Bunched Conductors ▪ Fine Enamelled

• Tinned Wires

Copper Wires

• Polyester Coated Winding wires

• Three Phase Dry Type

Transformers

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...With In-house process capabilities...

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▪ Full fledged Type testing laboratory

• Loads up to 500Amps

• Environmental test chamber for humidity test

• Salt spray test & all other basic tests as per UL Standards

• In-house tool room facility for manufacturing and servicing of Moulds and press tools

• CNC Wire Cut Machines and Spark erosion machines

• CNC Machining center, EDM Drilling

• Conventional machines

• Latest digital measuring equipment

• Inspected and certified by GE Tool Divisionca

More than 80% components made in-house

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...And a strong R&D team

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R&D expenses (Rs crore)

▪ In-house R&D Center

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12.00
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• More than 35 engineers

• Recognized by Department of Science, Govt of India

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9.07
7.75 [8.50]
4.27
2.50
FY16
FY17
FY18
FY19
FY20
FY21
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• Patented Rotary switches

• Five patents in process

• Manual Single-Phase Starter with no voltage tripping, Energy Saver System for Street Lighting, Integrated ammeter / voltmeter selectro CAM operated rotary switch, Track Feed Battery Change Over System and Fuse Automatic Changeover System

• 1[st] of its kind product in India

• Designed and manufactured Load Break Switches, Single Hole Mounting Switches, Halogen Free Cable Ducts, Flat Wire Ducts, Flexible Bus Bars etc

Continuous product innovation

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Internationally certified

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ISO 14001

ISO 9001

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CE Certification

UL Certification

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RoHS

Intertek Semko approval

CSA Certification

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ISO 18001

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CB certification

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... Across entire product portfolio

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Blue Chip Customers

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• Marketing Tie-up with L&T for Indian Market

• Largest supplier of rotary switches to Indian Railways

• Technical Tie-up with American Company C3Controls, to manufacture & market contactors & overload relays

• Technical Tie-up with Trafomodern for Three Phase Transformers

• Preferred supplier to:

• Branding partner to various large OEM’s in India

• Nuclear Power Corporation

• Schneider Electric

• GE Energy

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Wide Distribution Network

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International

• Direct network across 50 countries

• 17% of sales from global distribution

• 40 international distributors

• Plans to expand in US, Africa and Middle east

Direct network

across 50

countries

Domestic

• Tie up with L&T – access to more than 350 dealers in India

• Direct network for Modular Switches – 50 stockists in 4 southern & western states

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Way Ahead

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Way Ahead

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Operational Excellence

• Consistently executing business strategy and continued focus on improving operating costs by sourcing quality raw materials and efficient manpower

Venture into new project/ product development

• Seek Technical alliances to develop new and technically advanced products

• Formed JV’s with Kostad Steuerungsbau GmbH & EMarch LLP to enter EV market

• Acquired Kaycee Industries for new product development,

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• enter new ventures and leverage brand & distribution network

Focus on margin improvement

• Increase sales of high margin products – existing and new

• Increase exports – fast growing markets of US, Africa and Middle East

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Growth and expansion of existing product verticals

• Constantly develop new products through inhouse R&D

• Expand existing product portfolio to newer

• geographies

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Way Ahead

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Environment

• Committed towards a cleaner, greener and healthier environment

• Optimise energy consumption

• Towards this end Company has identified installation of rooftop solar panels

• Plan to recycle water as per environmentally friendly norms

• Increasing green cover around all plants in and around the manufacturing facilities

• Partner in EV Ecosystem to manufacture parts of environmentally friendly transportation

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Social

• Continues to contribute towards skill development among the local population

• Recruitment of rural youth for local sales operations

• Contribution for women empowerment. Engaged around 50% women employees hailed from local rural areas who are breadwinners of their families

• Spending under CSR Initiatives for health Care and education of rural populous particularly residing in the local regions

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Governance

• M./s JDS Associates for statutory audit, M/s. Covai Management Services for internal audit and M/s. G. Vasudevan for Secretarial Audit

• Five independent Directors out of 11 Members on the Board

• Focus on Better compliances and best governance practices

• Plan for gender diversification on the Board in due course

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Thank You

For further information, please contact:

Salzer Electronics Ltd.

Bridge Investor Relations Pvt. Ltd. Ms. Savli Mangle savli@bridge-ir.com Mr. Rahul Trivedi rahul@bridge-ir.com www.bridge-ir.com

Mr. Baskarasubramanian baskarasubramanian@salzergroup.com www.salzergroup.net

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