IKIO Tech — Q3 FY25 earnings call

Actually, the other expenses have increased on account of, I will throw some light on how our US operations are going on as of now. So, the subsidiary that we have in the US, which is Royalux LLC, so there we have two parts. One is the product that we are supplying to various categories, and one is the subcontracting. So, recently we have entered a new market in which we are working with the ESCOs. So, with those ESCOs, we are supplying products and there is part subcontracting as well. So, what is happening is that the subcontracting expenses are basically coming in the other expenses.

Clarified the reason for increased operating expenses and confirmed that new US business contributes healthy PAT margins despite higher costs.

Asked by Vipul Goel

Actually there are a few reasons why the EBITDA is lower than if you compare it to the previous quarter and traditionally also. The reason for that is our traditional business, the ODM business is much lower than what we had anticipated this year and that is one of the reasons but I would still say the silver lining is that instead apart from degrowth in that segment, we are still growing this year that is because our other verticals have been performing well and that is a good sign for the coming time. And apart from that, onboarding of expenses for the new businesses that we are, we have kickstarted a lot of new projects, new product categories, new product lines. So, onboarding of expenses that is still happening and those new streams are yet to give the revenue which will come at a later stage, maybe every quarter or two, like last year we started the business for the UAE, the Middle East so now the revenue has started coming in from that particular division, so likewise when all these new verticals when they will start bringing in the revenue so this effect will start going down and last quarter also one more thing happened is that in our hearable, wearable segment we onboarded a couple of clients. So, being the festive season, we were given very short time to execute certain orders. So, we took a strategic decision to supply those products at very bleak margins. It was done purposely in order to onboard those clients.

Explained the multiple factors contributing to EBITDA decline, including ODM slowdown, new business expenses, and strategic low-margin orders to gain new clients.

Asked by Darshil Jhaveri

So, what happened is, the ODM business, you can see that there is a decline in the nine months, that is the decline is around 10%. So, like I said, even if the business would have been flattish, we would have reached our target of 20% revenue growth. But at the same time, when we had planned out the entire year, as per the scenario where we were sitting at that point in time, we were expecting a growth of around 8% to 9% even in the ODM business. So, I was just mentioning that if that would have remained flattish, we would have seen a revenue growth of 20%.

Provided context on the ODM business decline and how it impacted overall revenue growth, while highlighting efforts to diversify and expand customer base.

Asked by Pawan

So, we have actually talked about this. I'm not sure whether you've been part of those calls or not earlier, very early on, during our IPO journey, these things they came up and we had very clearly mentioned that Mr. Ekam is the son of Mr. Hardeep. He has his business in the US that has got nothing to do with the business that we are doing here in India. So, basically the name is similar because that was kept many years back and at that point in time there were no plans of us going public. So, this we have discussed in detail. So, there is nothing that we have not spoken about or it is not mentioned anywhere. So, if you go back a little further as well, I would say one and a half to two years back. So, we did discuss a lot about this and everybody, all the investors whom we met or public in large during our earnings call earlier as well, we have discussed about this. So, but if you talk of the business that is there in India and the business that is there, he is definitely one of our customers for the export this thing but in terms of revenue, it is very negligible. And it is done at arm's length as well. I would say the revenue that, that relationship is doing is, I don't have that figure as of now in front of me, but in the overall scheme of things, it is very small.

Addressed concerns about potential conflicts of interest by clarifying the relationship with IKIO World and stating that business with them is negligible and at arm's length.

Asked by Nilesh Sharma

So, that I don't think is going to happen because Indian government is playing its cards really safely and smartly. And if that was the case to happen then you must be aware of all the restrictions that India has put and whatever is happening politically, it's out there in the world for everyone to see. So, we don't see that as a threat at all. And even let's say if that is a possibility, although it's not, just in case, just hypothetically speaking, if that is a possibility, but we are well equipped with what we are doing. So, initially in our early calls also, we have spoken about this in detail, especially for the US market, because we are not in India, let's say not in India, but in other parts of the world, we are anyways competing with China. So, the UAE market is one big example. We are competing with the players who are importing products from China. That is their main country of import. And but we are still winning in terms of the pricing and the quality. So, we are really in terms of quality, I would say ahead. And in terms of pricing, I would say at par with them. So, we don't really see that as a threat.

Provided management's perspective on the competitive landscape, particularly against Chinese imports, and their confidence in competing on quality and pricing.

Asked by Nilesh Sharma

So, the name change is basically being done because we are diversifying, we are already doing a lot. So, if we break up our revenue, a certain part is coming from lighting products and there is still a sizable chunk which is coming from non-lighting. So, in order to be more accessible to our customers in terms of their understanding of our Company, that was a decision that we took and in fact we were thinking about it since quite some quarters now because on the face of it, it looks like we are just a lighting Company whereas if you dive deep, we are doing a lot more than just lighting. So, that was done with that intention and the reason why all these things have been added is because just to give broader this thing and leverage to ourselves because now this name is going to stay with us for years to come, eternity to come for that matter.

Explained the strategic rationale behind the company's name change, emphasizing diversification beyond lighting into broader electronics and product categories.

Asked by Sanjay Sood

So, Block II, the construction work will be finished by March, April. Commissioning of that will take another couple of quarters, at least, because that is the time that it takes for setting up of the plant and machinery, the lines and everything and that is all based on as and when our existing new business verticals or the new relationships that once they start maturing that is when we start utilizing those plants to that tune. So, I think I will be in a better position to give you a percentage for that sense, maybe in the first quarter of the next financial year when we, because we are in the phase of now starting some of those relationships or some of those products that we are about to start with.

Provided a timeline for Block II commissioning and linked its utilization to the maturation of new business verticals and customer relationships, indicating a longer ramp-up period.

Asked by Sanjay Sood