Rishabh Instruments LtdQ3 FY23Electrical Equipment

Rishabh Instruments Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 1

Fundraise

N/A

Order

N/A

Capex

Yes

2 of 3 growth signals are positive.

Revenue guidance

Category 2

→The company aims for a medium to long-term top-line growth rate of about 20% to 25%.
→Current capacity utilization for aluminium die casting is around 60% overall, with some processes at 80%, indicating room for volume growth after expansions.
→A new production hall expansion project (about 18 months timeline) will add capacity, temporarily reducing utilization to ~50%, allowing future growth.
→Electronic manufacturing plant in Poland operates at ~50% utilization, offering significant scope for growth without immediate capacity constraints.
→The company plans to limit the number of key customers (~10 large and 10 moderate) to maintain economies of scale and manage alloy diversity, targeting managed portfolio growth.
→Growth is moderated by challenges like manpower and management bandwidth, particularly in Europe.
→Inorganic growth via acquisitions is also planned but not included in current growth forecasts.
→Overall, a disciplined growth approach targeting 20-25% growth in sales/revenue/volumes is expected.

Category 1

→The company targets a medium to long-term top-line growth of 20% to 25%.
→EBITDA margins are expected to improve to around 18% to 20% within one to one and a half years, up from current levels (~13-15% in some quarters).
→Adjusted EBITDA growth has been strong, with a 48% increase at the group level recently.
→Expansion plans include increasing aluminium die casting capacity and utilizing underutilized capacity in Poland (currently ~50% utilization).
→The company is onboarding innovative and long-term projects in electric vehicles expected to stabilize costs soon.
→Management moderates growth pace based on capacity, manpower, and talent availability, especially in Europe.
→ESOP-related costs will continue but EBITDA guidance of ~18% is after adjustment for these costs.
→Potential inorganic growth via acquisitions is being pursued but no guaranteed deals yet.

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→The company is investing in expanding production capacity, including a new building costing approximately INR 30 crores, but no explicit mention of raising new funds through debt or equity is made.
→There is mention of inorganic growth opportunities and potential acquisitions under consideration, with hopes to announce something potentially by the end of the current quarter, but details are not disclosed.
→The company has utilized IPO proceeds (around INR 63 crores) for product line investments.
→No direct statements regarding plans for new debt or equity fundraising were provided in the given pages.
→The firm is seeking government grants/subsidies such as MSIP scheme (India) and EU grants (Poland) for innovation and capex, which provide cash assistance but are not debt/equity fundraising.
→The management is conservative about growth projections and financial planning, with no indication of immediate fundraising needs.

→The management did not explicitly mention the exact current or expected orderbook value or pending orders in the provided transcript.
→However, they discussed launching four to five challenging and futuristic projects related to electrical cars with clients like Mallian and Valeo.
→These contracts are long-term, running for 5 to 8 years, indicating a healthy order pipeline for the Alucast division.
→The company aims to grow its customer base moderately, focusing on about 20 customer groups, balancing large and moderate customers to ensure efficient portfolio management.
→They target a growth rate of about 20% to 25%, moderated by capacity and talent availability.
→Overall, the long-term projects and strategy indicate a strong inflow of orders with cautious and sustainable scaling aligned with delivery capabilities.

Yes

→New production hall being built for aluminium die casting expansion, an 18-month project; expected to relieve current 80% utilization stress and bring utilization back to ~50%.
→Investment planned in expanding electronic manufacturing capacity in Poland, currently running at ~50% utilization.
→Around INR 30 crore allocated for building physical infrastructure expansion.
→Capex includes new electronic lines in India and Poland, SMT machines, moulding machines, test and calibration equipment for solar inverter production.
→Solar string inverter capacity is being increased, including development of 100 kW inverters and related testing equipment.
→Building investment supported by MSIP scheme (25% cash assistance) from Indian government; Maharashtra government support also sought.
→Applied for European Union innovation and automation grants covering approximately 30% to 40% of investment.
→Exploration of inorganic growth opportunities (acquisitions) ongoing with possible announcements by quarter-end.

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