Dixon Technologies (India) (NSE:DIXON) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Dixon Technologies (Q1 FY twenty seven) Earnings Conference Call hosted by TAM Capital Advisors Limited. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation Please note that this conference is being recorded. I now hand the conference over to Mr. Tanay Shah. Thank you, and over to you, sir. Yeah. Thank you, Anushka.

0:45 Good evening, everyone. Welcome to the Dixon Technologies q one FY twenty seven earnings call. Today, we have the management being represented by mister, vice chairman and managing director, and mister Saurab Gupta, director and group CFO. At this point, I will hand over the floor to mister Lal for his initial remarks, post which we open up the floor for q and a. Thank you, and over to you, sir. Thank you, Danai. Good evening, everyone. This is Atul Lal, and joining me today is our director and group CFO, Saurabh Gupta. Good evening, everybody. I would like to warmly welcome all our stakeholders to discuss our q one performance for 2627. Key highlights for the quarter are as below. Revenues for the quarter ended 06/30/2026 was 15,557 crores.

1:38 EBITDA, excluding fair value gain on the stake held by Dixon and Ariste Limited for the quarter was 472 crores. PAT after minority interest and excluding fair value gain on the stake held by Dixon in other than and for the quarter is $2.18 crores. During the quarter one financial year twenty six-twenty seven, the global and domestic electronics manufacturing landscape navigated a very complex macroeconomic environment characterized by persistent inflationary pressure across commodities and supply chain. Sharp price spikes in core input components exerted temporary cost pressures across the broader hardware ecosystem. However, DIXON's agile cost plus contract structures and pass through mechanisms enabled us to deliver a strong revenue growth even amid temporary volume friction.

2:35 Operating margin for the quarter reflected temporary compression on account of expiry of mobile PLI one in March 26 and from increased selling prices driven by elevated input costs and broader supply chain inflationary factors. As increased input costs were passed through increase in selling prices, percentage margins look optically lower, mostly in mobile and IT hardware business. While the sunset to mobile one incentives impacted short term percentage profitability. Dixon's strategic pivot towards component backward integration, including display and camera modules, along with participation in mobile PRA two and ECMS positions the company to drive absolute profit growth and restore operating margins from the next fiscal of twenty seventeen, twenty eighteen.

3:26 The washing machine and refrigerator business witnessed temporary margin pressures on account of volatility in polymer prices, other related input costs and adverse foreign exchange movements. These impacts are expected to normalize with cost pass through measures and operational efficiencies taking effect. Operationally, our execution continues to be strong with a stable manufacturing efficiencies, disciplined cost management and sustained customer demand across key businesses. We remain focused on driving absolute value creation through scale, productivity improvements and deeper backward integration. As we continue to expand our capabilities and benefit from the new growth opportunities, including strategic partnerships and increasing localization, we remain confident to deliver sustainable long term value for all stakeholders.

4:17 Our strategic focus and balance sheet optimization and capital efficiencies continue to yield strong results, driven by operational leverage, higher set turns and potential capital allocation with return on capital employed and return on equity at 34.123.4%, respectively. Enhanced working capital discipline resulted in an optimal working capital cycle of negative five days. We remain firmly committed to drive value accretive expansion across all verticals while maintaining strict capital management discipline and preserving superior return metrics for our shareholders. The timing of the announcement of the mobile phone manufacturing scheme is well aligned with the objective of the ECMS policy.

5:02 While ECMS is focused on building a robust domestic component ecosystem, the mobile phone manufacturing scheme is expected to create sustained demand for critical components by driving higher mobile production, greater value addition. We expect the contours of this scheme to be announced in a couple of weeks and remain excited about the opportunities in mobile and IT hardware business. Now I'll share with you the business performance insights in each of the segments, mobile and other EMS business. The revenue for the quarter for mobile and other BMS business was INR 14,179 crores with operating profit of INR $3.73 crores. During the quarter, mobile industry experienced a structured evolution from volume led expansion to value driven growth, while total shipment volumes saw a modest decline and with elevated global memory and component prices, the total industry market value expanded securely into the positive territory.

6:02 Mobile volume performance was aligned with temporary demand contraction seen across the broader smartphone market by 10% to 12%. While our top line witnessed a strong revenue growth due to higher input cost utilization. Our market position, customer engagement and manufacturing capabilities remain intact, and we expect 20% to 25% volume growth quarter on quarter growth as consumer demand strengthens and we have a strong order book. We received the P and C approval for our JV with VIVO in July 26, and we are now working towards the consummation of the transaction. We expect the JV to commence operations and start reflecting in our revenues from Q3 of the current fiscal. Construction of a 1,000,000,000 square feet facility in Noida with higher capacities for our anchor customer is almost completed.

6:52 We expect the operations to commence from Q3 of this fiscal. We are expanding the capacities of camera module and subsidiary QTEK, which is an ECMS beneficiary for the smartphones from 70,000,000 annually to 180,000,000 to 190,000,000 annually over next fifteen to eighteen months, largely catering to a captive smartphone volumes in addition to deepening the level of manufacturing. Construction of our display facility is completed and installation of machinery is going on for mobiles, IT, hardware products and automotive displays. The response from various brands is very encouraging. The trial will start from the beginning of Q3 and mass production to commence from end of Q3 and beginning of Q4 this fiscal. Telecom and Networking Products, the segment continues to deliver robust growth driven by strong adoption of five gs, FW and broadband equipment.

7:44 With localized subcomponents, scaled manufacturing lines and a healthy order book, the telecom vertical remains on track to serve as a growth catalyst for the current and coming fiscal years. Production of complex microwave backhaul radios for large global brand has scaled up successfully, and we expect to also commence exports of these products during the current fiscal year. Our joint venture with Taiwanese ODM Gemtek for manufacturing of optical transceivers, a small factor form pluggable and BOSA under our approved ECMS application will allow us to capture a share of growing demand in the telecom and data center segments. In line with the path to progress from a pure EMS provider to a solution oriented engagements, we have commenced a joint design and manufacturing agreement with multi customer.

8:35 IT hardware products, the segment delivered a healthy performance for the quarter under review, and we are on track for multiple goals this year. Our IT hardware product manufacturing unit in Chennai is rapidly evolving into India's largest IT hardware manufacturing campus, where we currently manufacture notebooks, desktops and AIOs, and I have held the order book. We have onboarded a high end gaming notebook customer. Our new manufacturing facility adjacent to our current facility in Chennai for a sixty-forty joint venture with Inventech Corporation, one of the largest top five ODMs in IT space, expected to get operational from Q4 of this fiscal. We have also expanded our capacity in an order facility for our anchor customer and have started manufacturing tablets in addition to laptops for our existing customer.

9:28 Moving strategically beyond traditional end client computing, and we are actively discussing with a joint venture partner to tap into the growth into the high growth enterprise server and data center hardware ecosystem, which allows us to address the surge in cloud and AI infrastructure demand and will start manufacturing SSDs from Q3 and also exploring other critical components such as power supplies and mechanical, which will enhance value addition and margins. Driven by the strong structural catalyst, we possess immense confidence and strong forward visibility in accelerating this vertical's trajectory, positioning it to become one of the most meaningful stronger pillars of Dixon's overall portfolio in the next few years. On Appliances, the revenue for the quarter was INR $3.82 crores and operating profit of INR 32 crores.

10:18 The segment continues to deliver robust top line growth driven directly by the strategic investments in capacity, product portfolio expansion and in house backward integration, molding and tooling capabilities. This integrated manufacturing approach enables us to deliver structural cost efficiency to our customers, while unlocking significant operational leverage as we scale production across both semiautomatic and fully automatic product line. We will start manufacturing semiautomatic washing machine in the higher capacity categories of sixteen and eighteen kilograms, which is the first across the industries. Additional for new manufacturing facility in Tirupati will expand our capacities from 600,000 units per annum by another 300,000 units per annum, including fully automatic front loading washing machine line, which will be launched in Q3 of this fiscal year.

11:06 We have started production of robotic vacuum cleaners with healthy order book and are on track to start production of dishwashers and microwave ovens in Q3 of this fiscal year. We remain confident that increasing premiumization and rising appliance penetration will continue to provide long term growth opportunities in this segment. Lighting. Joint venture with Signifier continues to deliver robust revenue growth, backed by strong growth in indoor lighting portfolio, led by battens and downlighters. While the lighting industry remains competitive, we continue to strengthen our position by leveraging our scale, engineering and designing capabilities and capitalize Signify's leadership position and long standing relationships with other customers across consumer and professional lighting categories. We expanded our production capacity to an industry leading 5,000,000 units per month, fully supported by backward integrated process.

11:58 Pursuing an active product mix improvement strategy, we have launched 1,000 plus SKUs, premiumizing the indoor lighting portfolio in the last two quarters and now we can cater to the entire portfolio with the indoor lights. In the coming quarters, we are also focusing on expansion of range of outdoor lighting portfolio. We expect to start export deliveries to the largest retail chain in U. S. And Germany in Q2 and Q3 of this fiscal. Consumer electronics, LED TVs and refrigerators revenues for the quarter under review was INR $9.87 crores with an operating profit of INR 58 crores. At ATV, the industry demand remained soft for value and mid range segment and impacted by sharp input cost inflation, majorly due to high memory prices on account of global supply tightness.

12:44 However, demand for larger screen that is 15 inches and above and premium two LED and OLED television remain relatively healthy. We have initiated mini LED production and the transition to an ODM model by Q2 of 'twenty seven, alongside launch of soundbar TV sales expanding our play in the premium home entertainment the the quarter. By The increase by the less increase intense summer and our seasonal rates. Despite these increase headwinds, we continue to see strong traction with healthy order book in direct wood and mini bars. Our ODM debt portfolio is filling well, enabling higher value realization and faster refresh cycles.

13:34 We're also expanding our capacities for manufacturing two door refrigerators, deep freezers, vivid coolers and side by side refrigerators, improving our value mix and building a broader appliance platform over the period. Despite the near term softness, we remain positive in the medium to long term growth prospects of the category supported by low household penetration, premiumization and increasing consumer demand. REXON Dixon Electronics, our 4,060 PCBA, ACPCVA joint venture with REXON continues its strong growth trajectory, characterized excellent cash flow conversion and an industry leading return on capital employed profile. Our new facility in Chennai will be operational starting August 26 with expanded capacity to meet demand of our anchor customer. We are in active discussion to onboard a couple of new customers for next year.

14:21 Airables and Wearables are fifty-fifty JV with Imagine Marketing that is both continues to deliver strong financial performance, supported by broad based revenue growth, healthy cash flow generation and lean balance sheet. Building on this momentum, the JV is expanding into additional electronic categories, including dashcams, smartwatches, power banks and mobile accessories. This diversification will improve capacity utilization and unlock operating leverage. With that, I'll conclude my remarks, and both me and Saurabh are here to take. I'm happy to take your questions. Thank you. Thank you very much. We will now begin the question and answer Participants are requested to use handsets while asking a question.

15:17 Ladies and gentlemen, we will wait for a moment for the question queue assembled. We take the first question from the line of Aditya Bhatia from Investec. You may proceed. Hi. Good evening, mister Lal and Saurabh. Hi. Good evening. Hi. Hi, sir. So my first question is on the PLI two scheme. How do you see that scheme benefiting us both in terms of additional incentive that may be available on backward integration as well as on the export side? Is it more about boosting volumes?

16:04 Or is the advantage likely to be more around margins? So, Arita, we feel that it's a very well curated scheme. It's a combination of both the elements that you mentioned. One is on boosting volumes, which we understand because the domestic volumes are going to be kind of under pressure. The additional volumes will nudge the brand owners to bring in exports out of India. And we at Dixon are already seeing a very significant traction from two of our anchor customers. So that is for building volumes. And in this, the PLA guidance is still awaited, but what we understand is is it gonna be varying between 2.5 to 5%.

16:55 Now that higher band of 5% is a very, very large element to support this... The export from India. And the second is on more and more localization. The figure that we understand is 1.5%, which is basically point 3% for each component, which is display, camera modules, battery, mechanical, and charger. And please also appreciate this point 3% is on the export value of the set, which is very large support on the component side. So these are the two important selling features, which we feel would help the Indian manufacturing industry in mobile to get into the global markets with deepening of value addition.

17:49 And third, of course, is the design element. We have to wait and watch for that. This is more focused on the local Indian brands. But the first two elements of the the PLI are, I think, extremely encouraging. Understood, sir. And on the export side, is it mainly about these two anchor customers, which are existing customers? Or do you think that there could be a larger opportunity elsewhere as well? New customer getting added the the the way it kind of played out in in the original DRI scheme? So we are all waiting for the exact guidelines to be rolled out. And then we'll have... We're having a GTM strategy for going beyond our existing customer portfolio.

18:35 But as of now, our two large relationships are extremely keen for looking at India and Dixon as the manufacturing base for servicing the global market. Sure, sir. So my second question is on working capital, wherein it appears that this quarter working capital has increased a bit From the cash flow statement, it appears that almost INR800 odd crores may have gotten consumed in working capital. So I just want to understand what has really transpired. And at the same time, we can also see that in the mobile phone business, capital employed has gone up. So is it on account of this working capital deployment or HKC JV, if you could just elaborate on that?

19:24 Sure. CapEx has been to the tune of $3.35 crores, but mainly there has been more working capital deployed for building certain inventories, strategic inventories, because there were supply chain challenges because the memory price hike. So we had to accumulate inventory across various verticals. And also, we had some extra cash, which you see lying at the end of March. It was a floating cash, which had to be paid off to the creditors. Yeah. So... So it's a combination of these three things. Yeah. So one is, of course, the inventory, would say, where strategic inventory which held us because the memory prices are also continuously increasing and it's on an increasing trend. And secondly, in some of the businesses, we have to back to back arrangement. So we got a lot of cash in end of March, which is subsequently paid beyond March. So that is the reason.

20:20 So this, you will see that over the period is... It'll continue to get corrected from here onwards. So, Ajay, please be rest assured it's a temporary Temporary phenomenon. Temporary phenomenon is gonna get corrected immediately. Sure, sir. Helpful. Thank you so much. Thank you. We take the next question from the line of Sameer Sinha from Macquarie. Please proceed. Yes. Thank you very much for taking my question. Mr. Lal, couple of things. First thing, just want to clarify this 20% to 25% growth in smartphone that you're talking about quarter over quarter. You were just referring to this particular quarter or are you talking about the year? No, no, we are talking about, Samit. This is Samit, this is Farah. We are talking about quarter two.

21:10 So as of now, we have given visibility. So quarter two against quarter one, we are expecting a 20%, 25% kind of a growth. So that is the order visibility that we are seeing from our brands. Okay. That's good. And can you just walk us through the seasonality of phone manufacturing? Obviously, the festive season is the time when most of these phones get bought and sold. So what should we expect beyond this 20% to 25% and for the rest of the year? And I guess the second part of my question is, is the guidance of 32,000,000 phones still intact? And if you can walk us through kind of the drivers for that, while the rest of the world or rest of the industry is declining, you're saying flat year over year, so that's pretty commendable. So here, Sameer, we are talking about the numbers without Vivo.

21:59 Now Right. Correct. Order book Yeah. Our order book for q two, to be precise, is somewhere around nine to 9,200,000. So by the first half, we would be close to around 16, 16 and a half million. Our last year numbers were around 30 to 33,000,000. We feel we should be somewhere close to that number. And I think that way the team has done a fairly good job because there is a very significant decline in the market. And we'll be we still feel that we'll be holding on to our numbers of last year. Right. So my second question is, I guess, you're talking about Inventec and operation by the fourth quarter. Then you also mentioned some data center server manufacturing, which should start in the third quarter. Can you give us just more details around both these two opportunities, which sound as if they are very good and very large and be interested to know more?

23:04 So for us, IT hardware vertical is an extremely important and high growth opportunity. The campus in in Chennai is already geared up for almost around 2,000,000 units. The product portfolio is now laptops, AIOs, and desktop. The north capacity, we've added a new product category of tablets along with laptops. The new SSD line, which is the first initiative of backward integration, has already been been installed. Top four out of five customers are there with us.

23:51 One new brand for gaming laptops has been added to the customer portfolio. What was... What I was referring to in my opening remarks was that our joint venture within WinTech, which is another top four global ODM in this space. The factory is getting ready, and this factory should become operational by end of q three or early q four of the current fiscal. In this, we're going to be doing PCBs. And also in this, we are in discussions with our partner for starting the server, the general server and also the data center servers. That is the plan. Okay. Got it. Thank you very much. I appreciate it.

24:37 Thank you. Thank you. We take the next question from the line of Siddhartha Bera from Nomura. Please proceed. Sir, Sir, the first question is, I mean, this PLI 2.0, any assessment now with this PLI scheme out and details to be sort of we also expect soon, what can be the export potential we can see from our anchor customers maybe in the next one, two years? And the current volumes which you are talking about, say, in Q1 or Q2, do what will be the export number in these, which we are already doing? So our current quarter export number was around 1,100 crores.

25:26 Yeah. We feel that in a couple of years, that can add almost 15 to 20,000,000 to our numbers, additional quantity in a couple of years. So which is an addition of almost 18 to 20,000 gross revenue. That's what we look at with our two anchor partners. Understood. And is there any potential to sort of look at more customers with Vivo also or anybody else also to try and sort of address this? And second is on this PayLay two point o also, we understand there will be some requirement of localization levels. So now we have already done a couple of them, and we already also had planned for enclosures and batteries. So if you can get us some sense on where are we in terms of localization as of now and in the next couple of years with these ramping up the JVs, where do we stand?

26:34 So there are two parts of PLI two. One part is going to be linked to your production value, which we feel largely will come from the global markets. The second, as I shared in my response to this question, is linked to the localization in which we understand the detail that is still awaited. They are mentioning five components. Out of which, we have a plane to camera modules and display. The other three components, see, the scheme has just been rolled out. We have to sit together and apply our minds that what can be Dixon's play in that. Is there anything very tangible as of now from our side? No. Not yet. But we'll definitely be sitting together that if we can have a play in that.

27:28 Understood, sir. Sir, last question on the feature phone side. We had talked about the big order book and a strong ramp up in volumes in the next couple of years. Can you highlight if there has been any change and are we on track for those type of volumes in this year and next year? So in feature phone, we are already the largest. Almost two third of the production being done in India is done with Dixon. We are with two of the largest brands in India. And what we had shared was that one of our anchor customers is shifting the export base to India, and this will rest assured that is on track. It gets further solidified with the ruling out of PLI two.

28:16 Understood, sir. Thanks a lot. I'll come back in the queue. Thank you. Thank you. We take the next question from the line of from Luvama Institutional Equities. Please proceed. Yeah. Good afternoon, sir. Thank you for the opportunity. First question, if you could help us with respect to the revenue for telecom and IT has separately, please? Yes. Revenue for telecom so telecom was around closer to 2,400 odd crores, and IT hardware is somewhere around $13.50 odd crores. And would it be possible to know what is the y y or q o q growth, if you could help us with that as well, sir?

29:05 I wouldn't be having right now, but IT hardware did a significant growth because now the business is coming to the rapid... The stabilization and ramping up is happening. The volumes are increasing with the brand. So IT hardware, definitely, there'll be a huge growth as compared to same period last year. And telecom, are... Yeah. Last year, are almost gonna be flat as compared to last quarter. Understood. Sir, if I missed out, I don't know, in terms of volume for the current quarter, is it somewhere around 7.5? Yes, that's right. So period around $7,500,000,000 volumes for spot. Got it. And of this, how much would be exports? I don't have the volume number. In absolute number, is closer to INR1100 crores. In volume wise, it would be of the INR7.5 million, I think, so INR0.6 million dollars or somewhere around between 600,000 to 700,000 Got it. Sir, my next question was in terms of the disadvantage, earlier we used to hear about the disadvantage India had versus China was somewhere around 10 to 12%.

30:20 So you think where are we right now and with the PLI, you know, would we become absolutely cost competitive, or it's more the China plus one which is helping in terms of the volumes as well on the export opportunity front? You see, we feel now that the the PLI being rolled out, the PLI two being rolled out for mobile is extremely extremely well thought out. A lot of number crunching is done, and now I think we can start on our own feet. So obviously, it's going to take time, but we are seeing a very positive traction from our existing anchor customers. Got it. Would we have the similar margin what we have for the domestic market for this export or it could be even better ex of incentive, sir?

31:12 So it's going to be similar. It be almost in the similar lines. Understood. Understood. In terms of the components, if you could call out what has been the EBITDA contribution for the first quarter? Would that be possible? So company, as of now, display has not started. Qtech is closer to INR500 odd crores. But I think it will take time for us to contribute meaningfully from this Qtech component thing. So I think so we'll be able to give a better guidance in the next couple of quarters. Got it. I'll call back in the queue for follow-up. Thank you so much. Thank you. Thank you. We take the next question from the line of Santosh Seshadri from Aventis Park. Please proceed.

32:05 Hi, good evening. Thanks for taking up my questions. I have a quick clarification on the PLA 2.0. Can you help us understand when this new scheme will start contributing meaningfully to margin? And is it large enough to offset the decline from the tapering of PLA 1.0? And on the localization requirement, do you see any margin benefits on capital consumption of some of these components like camera modules and display modules on the domestic sales that you have? So on the first part of your question, we feel that in a couple of quarters, the export volume should start coming in and they'll keep building up because it requires new model allocation, capacity creation, testing the new fixtures. But we feel that in a couple of quarters, it will start acquiring a significant mass.

33:04 The second is, yes, in a calibrated way, more and more localization is going to take place. And definitely, it's going to be margin accretive. Got it, sir. And just on the revenue side, can you break down the mobile revenue growth into volumes? And how much was contributed by volumes growth and average selling price? And it looks like the volumes were better than what we have guided for as of last quarter. So do you think that's a function of Dixon gaining wallet share? Or is it overall better market performance or, you know, any of OEMs that we work for gaining market share?

33:54 So definitely, in Dixon, we have gained the market share because the volume degrowth is significantly higher. So we have been kind of able to maintain our share. In fact, to maintain the volumes and increase the share. That's the way scenario is. And as we had mentioned, in q two, we have a much better order book. Thank you very much, sir. Thank you. We take the next question from the line of Rahul Agarwal from Igekai Asset. Please proceed. Hi. Good evening, Atulji and Saurabh.

34:42 Hi, Rohit. Hi. Congratulations for... You know, I know the profits are down y o y, but I think in the challenging quarter, you've done well. So who goes to that? Sir, just some clarification, pardon me for my ignorance, but mobile PLI two, is it gonna be only applicable for exports? Because when I read whatever is available publicly, I don't see that it is actually specifically mentioned. So whatever volumes are doing right now, not in terms of backward integration, but the smartphone volume we're doing right now and then we will also get added. Is any incentive, Dixon, wanna earn on that? So so... Sorry. So, Rahul, as of now, we have... Whatever understanding we have, of course, that exact details need to come out, which is... Hopefully, should come out in the next couple of weeks.

35:33 But first of all, this scheme should be effective from 04/01/2026. FY 2526 will become the base year of this PLI scheme. And as per our understanding, is that anything incremental that you do becomes eligible for PLI irrespective of exports? So Rahul, also to take further what's... Sort of we are sharing, it is gonna be brand wise. Yeah. It is not Dixon 2526. It's brand wise sales of Any brand x for which we are manufacturing. Let's say it is at a certain base for 2526. If the volume... If the value of production goes beyond that 2526, specifically for that brand, as per our understanding, it becomes eligible for the PLI.

36:23 The the practical scenario is that the growth is not there. So one feeds and the industry feeds that the growth is going to come from exports. That's the rationale. Are you understanding what I'm trying to say? Yes, very clear, sir. So even I was thinking the same that fiscal 'twenty seven because the industry will go down domestically, the base year of 'twenty seven doesn't really make sense. Right? I mean, the fiscal twenty seven being the first year, nobody will get an incentive. Right? But again, Rahul, to your point also, the memory prices have gone up. So the selling prices of phones have also gone up. So that will also potentially can help in higher revenues also. So the number crunching Rahul that we have done for our anchor investors, when the export comes in, we definitely become eligible.

37:12 Right, sir. And just a couple of smaller questions. We saw some media reports talking about some Chinese approvals needed for the Vivo JV. If you could just clarify that. And secondly, just on the new businesses, you spoke about telecom IT, and we've been talking about that for last three quarters. And that business has been ramping up pretty steadily. Just in terms of over and upwards of mobile, right, and more so from a fiscal two thousand nine hundred thirty perspective, I know it's a very long term and current situation is so volatile. But what are you excited about in Dixon in terms of new products for fiscal two thousand nine hundred thirty, which could actually scale up to like INR 500 top line? So something on that bit would really help. Thank you so much. Responding, Rahul, to the first part of your question, as we shared in the opening remarks that our Vivo JV is going to get booked to buy and transaction concluded within the next two months.

38:14 And the numbers are going to get accounted for in our financials from Q3 fiscal. I hope that answers your question. The second part is on the growth beyond mobile. So first, beyond mobile is the scaling up of our components business that is both display and camera modules. Then we feel that we feel that we are at an inflection point in our IT hardware business, which is the consumer side itself. We feel that we're gonna be having a very large share of the Indian market for laptops, tablets, desktops, AIOs. Extension of that partnership with in which we are gonna be pouring into the more higher end products like servers.

39:10 And then the backward integration play there of SSD modules. So if you see a significant potential, a very significant potential into the high tier hardware business, it's going to be almost a replication. Of course, the opportunity pool is not as large. It's going to be a replication of a mobile domain. We are extremely excited about the telecom venture in which we are expanding our product portfolio. I shared in the opening remarks that we have gone into already the manufacturing of products like microwave radios, which is beyond the CP products. And also our JV with Gemtek, Taiwan, for getting into the optical transducers, that is the SFPs for the end use, both in the telecom network as well as the data centers.

40:03 Then there is an expansion of our home appliances portfolio, wherein we are going to be launching very shortly in our washing machine divisions, the new product category of front loading washing machines. And Dixon is the first OEM in the country that is going to be launching this this particular product. Further, are starting manufacturing for our anchor customer, microwave ovens and dishwashers in a couple of months. We are going to be rolling out the ODM solutions for dishwashers in next six to eight months. In our refrigerator category, we are expanding our capacity from 1,510,000 to almost 3,000,000.

40:52 We're going to be starting manufacturing side by side refrigerators in a couple of months. The new product categories of FrostFree two forty and two eighty liters, deep freezers and busy coolers is going to be launched by Q4 of the current fiscal, expanding the capacity from 1,500,000 to 3,200,000, which is going to be the largest capacity of refrigerator in a single site. Now these are all exciting opportunities for us. And also, in a lighting vertical, wherein we have a deep relationship now in a lighting vertical with Signify. We're looking at export opportunities. We have launched almost thousand SKUs on the Luminar side in the last six months.

41:44 We have got significant breakthroughs in export markets. We will be starting exporting lighting products to the largest retail chains globally in the next quarter, the largest retail chain in Europe in the next quarter. We would be launching the professional range of street lights, flood lights, industrial lights in the next six to eight months. So these are all growth opportunities for Dixon. We are extremely confident that there is no lack. I mean, the runway for growth is is extremely good. Perfect, sir. Thank you so much, and best wishes for the year to come. Thank you. Thank you. Thank you. Thank you. We take the next question from the line of Bharat C. Shah from BCS Capital Ideas Private Limited. Please proceed.

42:44 Yeah.. I really had a question not for this year or next year, but a little down the line, maybe three years and more, is to how the picture is I visualize is emerging. And I wanted to get your thoughts on that whether I'm understanding it right or it requires modification. So if I retrace a little bit of journey of EMS in India and Dixon in particular, I think the phase one of yesterday for whatever number of years was characterized by limited categories.

43:33 Basically, designs of the brands while role of Indian firms was restricted largely to manufacturing to the print, and the value add was low. And scale also was emergent one and had not really fully established. I think in the last two, three years and today, we have certainly established scale, for example, in the mobile phone very clearly. Exports also emerged from the Apple ecosystem in a significant way. And we have improved our value add. We have improved our... Some component of design grade manufacturing.

44:22 But as I visualize, some of these advantages probably will remain for a limited period of time unless India itself makes significant change in the trust of the ecosystem. Because as I see the future of the EMS manufacturing, it will mean scale, it will mean own designs, it will mean technology, and using AI grade shopping and manufacturing flows, advanced material, advanced engineering, and our own proprietary knowledge. And time to build those competence will take years. And if these are not fully in evidence in some time, our current advantage is probably, I'm afraid, may dwindle over the period of time. And I wanted to get your thoughts on this.

45:21 So, Prabhay, you have touched my heart. Yeah. So the question and the narrative that we have just shared is absolutely apt. In Dixon, we have to... And we have started initiating that we have to focus more on technology, we have to focus on AI and manufacturing, we have to ex... Acquire the skill set for IP acquisition, and much deeper sciences. Now what we are trying to do, the DIXON's growth, if you're seeing strategically, is being pursued through partnerships.

46:14 And many of these partners, whether it's Inventech or Gemtech demand for optical transducers or long share for mobile designing. They're all masters in their own domains. The whole objective and what we're trying to pursue is that in Dixon, we need to acquire talent and build the capability of acquiring that knowledge and implement it on our shop flows, in our r and d centers. So in our own way, we have initiated that.

47:03 So just to share with you, we have now launched the center of excellence in this Spilani, which from August is gonna be rolling out an MTech program, specifically in these areas of display, optics, artificial intelligence, robotics, humanoids, tools and dyes, precision engineering. And the courses have been curated. The faculty has been selected all by us. There's a governing council, which I lead along with the vice chancellor of Bitspilani. The same thing is going to be replicated, and that's for product designing at Bits Pilani Hyderabad campus.

47:51 And for the larger initiative on the scientific side, the same MTech program is being launched at Prashtra University, Chandigarh, Mohali. So the whole idea is deepen the partnership with possibly the best globally, bring in foreign talent, or nurture Indian talent to acquire their skill set. Now it's gonna take time, but that is the building block one is trying to put together. I'm delighted to know about the COE at Pit Spilani and what you described about physical AI initiatives. Atulci, what about advanced material capability, specialty chemistry capability, advanced engineering strength, which are design lead?

48:53 What are the steps in that direction? So let's say, this front loading design of the front loading washing machine, I'll come to the other part that you're answering, but I'm just keen to share. The front loading washing machine that is being launched, the front loading washer is an extremely complex SKU. So we've gotten the r and d head of a large global conglomerate from Korea to head our r and d. And our team along under the mentorship of this Korean senior person has developed the solution. So what's happening is that in this process and this project is being done within ten months, the complete team is just absorbing the knowledge which is at a global level.

49:47 Now what one is trying to do at Bits Pilani is not purely only manufacturing technology. That's the reason I said that what you what you mentioned earlier is exactly what my focus is. That all this has to be acquired with deep sciences. Let's say when we're talking about display, I'm talking about materials. I'm talking about chemistry. When I'm talking about tools and dyes, I'm talking about deep metals. Again, chemistry. So that's what we are trying to do. If Dixon has to reach somewhere, those extremely strong building blocks, of course, along with the financial metrics has to be built in.

50:37 No. Delighted to delighted to know that. One last week on Beyond the financial metrics, you know, is this something something Of course. One last bit on that. I I suppose the initiatives and thoughts are in areas much more than devices, personal devices, and appliances and all of that into precision engineering and precision manufacturing because that's where greater value aid and superior margins would lie. Of course, it will also call for significant investment in the interim period, and that has to be accepted without any doubt.

51:27 But over the period of time, the future, I think, would remain and would get enhanced with that. On the other areas in precision manufacturing, some thoughts at your end? So please be rest assured, sir. We are aggressively working in that direction, specifically in the area of precision engineering. Sorry. I'm not able to share more details. Hopefully, things will come back to you shortly. It's specifically in the area of precision engineering. So what you have highlighted is already we are working on. Maybe give us some more time, sir. We will come back to our shareholders what exactly we are talking about.

52:15 I did share it in my opening remarks because it's not fair. But since you have raised this question and mentioned this extremely important point, just be rest assured that we are very deeply working in this domain. Oh, thank you,. And I strongly, I don't believe if this journey has to be attained at a scale by some company in India, I think DIXON is going to be at the forefront of it. And therefore, the concern and belief that why this journey needs to be carved out. Thank you so much, and all the best. Thank you. Thank you so much. Thank you, sir. Thank you. We take the next question from the line of Ravi Swaminathan from Avanas. Please proceed.

53:06 Hi, sir. Thanks for taking my question. I have one question regarding server global market. We have big players like Foxconn, etcetera, who have almost like more than 40% of their overall revenue coming from data center driven servers, and it has built up especially over just post COVID. Kind of over the next three to four years, how is the journey for Dixon likely to be with respect to servers? What are the positives that can pan out? What can be what are the challenges now which we face with respect to server manufacturing? So undoubtedly, opportunity remains. And therefore, referring to both servers, general servers and the cloud servers.

53:55 That's what we shared in response. We will be leveraging our deep relationship with a joint venture partner in Kente, largest global player. In the Chennai campus, this factory is being built up. We will be we will be... Our footprint for server management. Got it, sir. Yes. Thanks. Thank you. We take the next question from the line of Abhishek Ghosh from DSP.

54:40 Please proceed. Hi, sir. Thanks for the opportunity. Sir, just wanted to clarify one thing in terms of mobile. You're calling out that first half, you'll be doing about 16 odd million. So second half also, that means about 16,000,000. Last year, was about 12,000,000. So ex of Vivo, you will still see a strong growth in second half despite memory issues kind of been there. So just wanted to reconfirm on that, I'm saying the kind of order book and outlook at present we have, we feel so. Sure. However, you know that how the market is going to pan out, one has to wait and watch and see. So last day, we did around 32. First half, we're confident because the immediate order book for the next two months is there.

55:27 July has come to an end. We will be closing at almost 16,000,016,500,000 Okay. Okay. That's going to be largely out of the market share gains in domestic or will it be export led? Any thoughts on that? So... Largely, Abhishek, it is a have because taken market as you know, the market will contract this year. Correct. And as per the previous reports, it will contract by a decent number, double digit number. And within that, if we are able to maintain our market share up to the similar volumes as what we did last year, I think so definitely, it clearly shows that we have gained market share from other U. S. Operators. Got it. And so the other thing is on margins, since optically the margins look lower on a rising input cost.

56:16 From here on quarter on quarter, the margin profile should stabilize to improve and exit should be better because of components coming in. If you can just help us through that bridge. Abhishek, the component play would largely play out next year. Of course, Qtech will start contributing, but it's contributing, but that's a small contribution as compared to the display, which will start coming from q four, and then it will take time to ramp up and stabilize. We feel that the memory issue, the prices of memory will continue to go up or at least not come down. So the margin, there will always be margin pressure in this business. So we are not expecting a margin improvement from here onwards. Of course, in our our in in year. In the current year. But definitely next year, the margin should start to improve.

57:05 Got it. Okay, sir. Thank you so much for clarifying and wish all the best. Thank you. Thank you. We take the next question from the line of Niranshan Jain from BNP Paribas. You may proceed. Yeah. Hi, sir. Good evening. Thank you for the opportunity. Sir, my first question is just a clarification on the incentives again. So based on our current understanding, will Vivo volumes would be eligible for these incentives since FY 'twenty six is not in our base. So will it incrementally be eligible? Or do you think it's based on the production of the brand, so it will not come under the scheme? So as we shared with you that the threshold is on the basis of the brand wide production. If the concerned brand production is going beyond the threshold, as per our understanding, although the final print and the guidelines still have to be rolled out, It will be on the incremental production over the threshold brand production of last year.

58:09 Got it, sir. And, sir, secondly, on the retention for these incentives. So based on our understanding, at least, in the p and I one point o, we saw a lower retention with DIXON, primarily to gain more market share and to get more brands. Now with that, like, a decent volume size, do we believe that for this round of incentives, our retentions could be much higher versus what we have seen in PII 1.0 or any discussions that we had with the customers regarding the retention rate? So that's slightly difficult responding to that question. We'll take it as it comes. Sure, sir. Sir, and if I can just squeeze one more. Sir, on the Q Tech, so before the acquisition, Q Tech used to make closer to six to 8% EBITDA margin.

59:00 And now if you've seen since the last three, four quarters, since the acquisition, the margin seems to be subdued, like, since it has not added to any margin uptake in our mobile and EMS business. So may may I know the reason for this? And since when can we start expecting a margin uptick from Cutech back to the levels that it used to make before the acquisition? First of all, Mirage's statement is not right. It is adding to our margins, but not to the same potential as what we had thought. So it is taking some time for us to deepen the level of manufacturing, put more capacities. And also some of the FX has also has played a spoil sport in this business for some time. But now those things will hopefully got all behind us. So gradually and slowly as the capacities are building, more deepening of manufacturing happens.

59:47 Volumes, of course, they are a large player in the Android ecosystem. So the margin profile will continue to work. So so Please be rest assured rest assured that quarter on quarter, the margin profile will improve. It was a temporary aberration, primarily because of some currency implications, which is now largely has been corrected. Surely, sir. That's very helpful. Thank you and all the best. Thank you. We take the next question from the line of Samit Sinha from Macquarie. Please proceed. Yes. Thank you. So I have actually a couple of follow ups. Mr. Lal, you mentioned something about the PLI being effective April 1. Are you saying that it's going to be retroactive to April one of this year?

1:00:37 And the second question is, in the last earnings call, you spoke about the opportunity in industrial EMS. Can you tell us can you give us an update on what's happening over there? Those are two questions, then I have a follow-up. So as for responding to the first part of your question, as per our understanding, it's going to be applicable on 04/01/2026. Responding to the second part of questions, please be rest assured, as I've shared with Mr. Baruchow also, that we are aggressively pursuing some opportunities in this space. Got it. And so one just one follow-up. I mean, it just seems like between PLI and ISN to point to the reduced duties on certain imports, The government seems to be getting behind the electronics industry.

1:01:34 And is that anything else that we can expect or am I getting too greedy here? No, I think the policy framework for electronic industry has been one of the most supportive, and we really want to thank the government. Also, policy framework intervention, which is extremely positive for us, is a duty reduction on the inputs for display for automotive. And that's an extremely important sector for us. The first line being installed in our display plant is for automotive and IT products. And with the duty reduction, the arbitrage significantly goes up. So that's a very major positive for us.

1:02:24 Got it. Thank you very much. Thank you. Thank you. Thank you. We take the next question from the line of Achal Lohode from Nuvama Institutional Equities. Please proceed. Yeah. This is. Thank you for the follow-up opportunity, sir. Just hopping on the previous question with respect to telecom and IT hardware. If you could call out, you know, you had earlier indicated certain revenue numbers for FY 'twenty seven, 'twenty eight. If you could talk about that, are they on track? Or is there any upside to those revenue figures? So you're talking about telecom revenues? Telecom and IT ad, both. Yes.

1:03:11 So telecom revenues, please appreciate we have grown from 700 to 3,600 to 5,000, and we feel, as I mentioned earlier, we're be somewhere between 6,700 to 7,000 crores in this fiscal. And there's gonna be a decent growth next year. That's that's where we are. In in the case of IT hardware, the order book is extremely strong. We appreciated the first quarter. IT hardware numbers are approximately 1,300. So basically, that which we did in the whole year last year. So that's the that's the kind of growth. And it's gonna be just keep on ramping up. Please be rest assured. And if you could talk a little bit on the margin profile for these two segments, sir?

1:04:03 So margins on telecom side this... In this quarter was almost 5.1% of operating margin. And how about hardware? Yeah. IT hardware is slightly... It's going to be lower? Yeah. It's slightly lower, similar to what we make on mobile. Mobile. Telecom is slightly higher than what we make on mobile segment. Got it. There was one media article about the MOU signed in in Madhya Pradesh with respect to telecom. If you could elaborate or clarify on the same, sir? So the Government of India and Madhya Pradesh government have formed an SPV to set up a telecom manufacturing zone in Gwalia.

1:04:51 It is an extremely attractive scheme wherein land and building is at 1 rupee per square meter for a thirty year lease. There is a capital subsidy of almost 50%, and there is an employment allowance for workers of almost 5,000 rupees per worker. There is a power direct subsidy of 2 rupees per unit. There is a skilling subsidy for 13,000 per worker up to 4,000 workers. It is right next to the expressway. It is five minutes from Warrior Airport. It is five, seven minutes from Warrior Station.

1:05:38 It's 20 kilometers from ICD Malinpur. So we are we are... We're gonna be establishing our footprint there. It seems like the participant is out of the queue. We take that as the last question for the day and would now like to hand the conference over to the management for closing comments. Over to you, sir. So thank you very much, everyone. Really appreciate you participating in this call. Thanks very much. Thank you very much. Thank you. Thank you.

1:06:25 On behalf of TAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.