Dixon Aims 90% Revenue Growth In FY22 On Electronics Incentive Scheme

Dixon Technologies Ltd. expects revenue and profitability to surge in the financial year ending March 2022, aided by the government’s incentive scheme for large-scale domestic electronics manufacturing.

For 2020-21, growth in revenue will be around 40%. For FY22, revenue and profitability are expected to grow 90%, driven by the mobile performance-linked incentive scheme, according to Saurabh Gupta, chief financial officer at the contract manufacturer of lights, televisions, mobile phones and home appliances for Xiaomi Corp., Samsung Electronics Co. Ltd., Voltas Ltd., LG Electronics Inc. and Foxconn Technology Co. Ltd.

Mobile, he said, is likely to account for 40-45% of the business, while “strong contribution” will also be seen from set-top boxes. “For mobile PLI business, the company is in deep discussion with three global brands. [We have] already taken a factory on lease in Noida and will start manufacturing from mid-January 2021,” Gupta told BloombergQuint’s Niraj Shah in an interview. Revenue worth Rs 11,500-12,000 crore, according to him, is expected to come in 2021-22, and margin may be between 4.6% and 4.7%.

In October, India shortlisted 16 domestic and global electronics makers under the performance-linked incentive scheme. Padget Technologies Inc., an arm of Dixon Technologies, is among the five domestic companies shortlisted. Incentives will be provided in each of the next five years for manufacturers opting for the scheme. The country expects production worth Rs 10.5 lakh crore and exports amounting to Rs 6.5 lakh crore over five years by domestic and global companies.

Dixon Technologies reported a 17% year-on-year increase in its consolidated revenue to Rs 1,638.7 crore in the quarter ended September. Its margin improved 77 basis points over the year-earlier to 5.47%.

Other key highlights from BloombergQuint’s conversation with Saurabh Gupta…

• Revenue rose due to getting higher wallet share from existing customers and the addition of new customers in all verticals. The overall demand remains robust.
• Operating leverage benefit is kicking in as scale is increasing, especially in verticals like LED TV, washing machines and lighting. Change in sales mix, value engineering, customer acquisition and some verticals are seeing automation, which has helped the company increase its operating leverage.
• The order book is high for low margin items—LED TV, mobiles and set-top boxes for next six months. Absolute growth in Ebitda will be very good in the third and fourth quarters of fiscal 2021, but the margin is expected to come down to 4.5-4.6% as the contribution of low-margin electronic manufacturing services business increases in overall revenue.
• In consumer electronics, new customers have been added; will see 30% growth in fiscal 2021, and another 30% in the next fiscal. Curbs on television imports from China have helped the company to get more orders.
• Back to 90% utilisation for the lighting business, and significantly increasing production of baton and downlighters.
• The fully automotive machine will start contributing to the revenue from fiscal 2022.
• Medical testing kits have a high margin of 20% and there is a demand from government and health facilities. The company plans to ramp up its capacity to 300 medical units per month.

Watch the full interview here: