27th June23 —Cyient DLM –IPO opens today –CNBC :
Interview with Krishna Bodanapu :
–Biz is currently Build-to-Print where essentially the client gives the design & we are the contract Mfers. This is 99% of the biz
–This will continue to happen for the next 1/2 yrs , the whole intent is going forward as per order book, we see that we will have a lot more Build-to-Specifics work ( where the design and mfers is our own ) , this will be in the next couple of yrs.
–This Build to Specs biz will be mostly 20/25% of the biz in a steady -state
–Margins on Build to Specs is higher as when we design something we have a control on what parts we use , therefore we can optimise based on parts/ availability of parts & mfring processes
–As Build-to-Spec gets larger we have a large head-room on margins
–Build to Print & Build to Specs difference in margin is 3/4% higher in Build to Specs
–Build to Specs is difficult to crack as most clients dont want to share the IP & give control to a 3rd party. 2nd Reason –Its a matter of time and these industries are mature and lot of what we design is already been designed many yrs ago. Now we are at inflection point where the design itself will change with the new innovations in Semi-conductors and AI based new innovations
–In 2yrs time we will not see this change , it will change in the next 3/5 yrs time frame
–We are at 11% Margin , the expectation is 12% as we have made lot of investments in last year in leadership / supply chain / tech —we will see 12% in the next 12/18 months.
–We have a run-way on supply chain optimisation / utilization given that we are running at 1/3rd capacity , there are no. of levers which will help us get to 13/15% margins in the next 24 months. The head-room is beyond that.
–2 drivers of this Margin expansion is increase in capacity utilization & 2nd is investments we have made, 3rd is pricing of the order book for newer orders.
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