Dixon Technologies (India) Ltd:Annual Report 2023-24 Analysis

Dixon Technologies (India) Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Dixon Technologies (India) Ltd. was established in 1993 by Sunil Vachani. The company began as an electronics manufacturing services (EMS) provider focusing on color televisions.

Headquarters Location and Global Presence:

The company’s headquarters are located in Noida, Uttar Pradesh, India. While primarily focused on the Indian market, Dixon has expanded its global presence through exports and partnerships.

Company Vision and Mission:

• Vision: To be the most admired and trusted global manufacturing partner, empowering brands with innovative solutions.
• Mission: To deliver exceptional value to our customers by providing cutting-edge manufacturing solutions, fostering innovation, and building lasting partnerships.

Key Milestones in their Growth Journey:

• 1993: Established as an EMS provider for color televisions.
• Early 2000s: Diversified into manufacturing other consumer electronics.
• 2017: Initial Public Offering (IPO) and listing on stock exchanges.
• Expansion into new product verticals like LED lighting, mobile phones, and home appliances.
• Continued growth through strategic partnerships and capacity expansions.

Stock Exchange Listing Details and Market Capitalization:

Dixon Technologies (India) Ltd. is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Recent Financial Performance Highlights:

Recent financial results can be found on the company’s investor relations page and through financial news sources. These details typically include revenue, profit, EBITDA margins, and key growth drivers.

Management Team and Leadership Structure:

• Sunil Vachani: Executive Chairman
• Atul B. Lall: Vice Chairman & Managing Director

The company has a well-defined organizational structure with experienced professionals leading various departments and functions.

Notable Awards or Recognitions:

Dixon Technologies has received awards and recognitions for its performance, innovation, and sustainability initiatives. These recognitions may be available on the company’s website or through industry publications.

Their Products #

Complete Product Portfolio with Categories:

Dixon Technologies offers a diversified product portfolio across several categories:

• Consumer Electronics: LED TVs, Washing Machines
• Lighting Solutions: LED Bulbs, LED Battens, Downlighters, Streetlights
• Mobile Phones: Feature phones, Smartphones
• Home Appliances: Refrigerators
• Security Systems: CCTV Cameras, DVRs
• Medical Electronics: Medical Equipment

Key Technological Innovations or Patents:

Dixon Technologies invests in R&D and has obtained patents for innovative designs and manufacturing processes in areas such as LED lighting and consumer electronics.

Manufacturing Facilities and Production Capacity:

Dixon Technologies has multiple state-of-the-art manufacturing facilities across India. Production capacity varies depending on the product category and is continuously expanded to meet growing demand.

Quality Certifications and Standards:

Dixon Technologies adheres to stringent quality control measures and holds various certifications, including:

• ISO 9001: Quality Management System
• ISO 14001: Environmental Management System
• Other relevant industry-specific certifications

Recent Product Launches or R&D Initiatives:

Dixon Technologies regularly launches new products and undertakes R&D initiatives to stay ahead of market trends and technological advancements.

Primary Customers #

Target Industries and Sectors:

Dixon Technologies primarily serves:

• Consumer electronics brands
• Lighting companies
• Mobile phone manufacturers
• Home appliance brands
• Retail chains

Geographic Markets (Domestic vs. International):

The company primarily focuses on the Indian market, with a growing emphasis on exports to international markets.

Major Client Segments:

Dixon’s client segments include:

• Large consumer electronics brands
• Major lighting companies
• Indian mobile phone brands
• International electronics OEMs

Distribution Network and Sales Channels:

Dixon Technologies leverages a combination of direct sales, partnerships, and distribution networks to reach its target customers.

Major Competitors #

Direct Competitors in India and Globally:

• Amber Enterprises India Ltd.: An EMS provider specializing in the HVAC industry
• Kaynes Technology India Ltd: An EMS provider focusing on Automotive, Industrial, Aerospace and Defence industries.

Competitive Advantages and Disadvantages:

• Advantages: Large-scale manufacturing capabilities, diversified product portfolio, strong relationships with leading brands, focus on R&D and innovation.
• Disadvantages: Dependence on key customers, exposure to raw material price fluctuations, competition from global EMS providers.

How they differentiate from competitors:

Dixon differentiates itself through its wide product range, focus on high-quality manufacturing, investments in technology, and ability to offer end-to-end solutions to its clients.

Industry Challenges and Opportunities:

• Challenges: Intense competition, fluctuating raw material prices, technological disruptions.
• Opportunities: Growing demand for electronics in India, government initiatives promoting local manufacturing (Make in India), increasing adoption of smart technologies.

Market Positioning Strategy:

Dixon positions itself as a leading EMS provider offering innovative and cost-effective manufacturing solutions to its customers.

Future Outlook #

Expansion Plans or Growth Strategy:

Dixon Technologies plans to continue expanding its manufacturing capacity, diversifying its product portfolio, and strengthening its relationships with key customers. The company is also exploring opportunities in new sectors like medical electronics and IoT.

Sustainability Initiatives or ESG Commitments:

Dixon Technologies is committed to sustainable manufacturing practices and has implemented initiatives to reduce its environmental footprint, promote energy efficiency, and ensure responsible waste management.

Industry Trends Affecting Their Business:

• Increasing demand for smart and connected devices
• Government support for domestic manufacturing
• Growth of the Indian electronics market
• Advancements in manufacturing technologies

Long-Term Vision and Strategic Goals:

Dixon Technologies aims to be a global leader in electronics manufacturing, known for its innovation, quality, and sustainability. The company’s long-term vision is to empower brands with cutting-edge manufacturing solutions and contribute to the growth of the Indian electronics industry.

Dixon Technologies (India) Limited: Financial Performance Analysis #

3-Year Trend Analysis of Key Financial Metrics (Consolidated) #

• Revenue from Operations: Increased from ₹12,19,201 lakhs in FY23 to ₹17,69,090 lakhs in FY24 (45% growth).
• EBITDA: Increased from ₹51,836 lakhs in FY23 to ₹72,019 lakhs in FY24 (39% growth).
• Profit After Tax (PAT): Increased from ₹25,508 lakhs in FY23 to ₹37,492 lakhs in FY24 (47% growth).
• Return on Equity (ROE): 25.2% as of March 31, 2024 (compared to 22.4% last year).
• Return on Capital Employed (ROCE): 38.0% as of March 31, 2024 (compared to 35.8% last year).
• Net Debt to Equity: (0.03) as of March 31, 2024.
• Basic EPS: Decreased from 35.53 in FY23 to 31.12 in FY24.
• Diluted EPS: Decreased from 35.27 in FY23 to 30.93 in FY24.

Business Segment Performance #

• Consumer Electronics: Operating profit of ₹141 crores with a 3.4% operating margin in FY24. Revenue decreased by 3% YoY.
• Lighting Solutions: Operating profit contribution of 8% in FY24. Revenue decreased by 25% YoY.
• Home Appliances: Operating profit contribution of 19% in FY24. Revenue increased by 5% YoY.
• Mobile Phones and EMS Division: Revenue grew by 109% YoY, reaching ₹10,919 crores in FY24. Operating profit was ₹355 crores, with a 3.3% margin (113% increase). 15 million smartphones and 38 million feature phones were produced.
• Security Surveillance Systems: Revenue increased by 29% YoY in FY24. Operating profit contribution was 2%.
• Wearables and Hearables: Recorded revenue of ₹ 747 crores.
• Refrigeration: Commenced Commercial Production of 1.2 million units per annum.

Major Strategic Initiatives and Their Progress #

• Backward Integration: Ongoing efforts across multiple segments, including injection molding and LED bar utilization for TVs, an in-house tool room for mold production in home appliances, and SMT lines for PCBA.
• Capacity Expansion: New refrigerator plant in Greater Noida, and a washing machine plant in Dehradun were inaugurated. A new facility for Bluetooth enabled speakers and smartwatches was established. Expansion of SMT capabilities in the security surveillance segment.
• Partnerships and Collaborations: Collaborations with industry players, including Android and Google TV sub-licensing, partnership with Samsung for Tizen OS, and manufacturing agreements with Lenovo, and Xiaomi. Joint venture with boAt for wearables and hearables, and with Bharti Group for telecom products.
• Digital Transformation: Integration of Industry 4.0 practices, including automation, AI, and data analytics. Implementation of digital tools and technologies (MES, supply chain platforms) in partnership with Dassault and Blueyonder. Migration of SAP system to Google Cloud.
• R&D Investment: Increased investment in R&D to develop domestic design solutions, new product, process innovation and establish centers of excellence.
• Production linked incentive scheme: Padget Electronics is approved for participation in IT PLI 2.0.

Risk Landscape Changes #

• Geopolitical Risks: Mentioned as a strategic risk with ongoing conflicts and supply chain disruptions.
• Cybersecurity Risks: Addressed through enhanced cybersecurity and data security frameworks, collaborations with global technology leaders.
• Compliance Risks: Addressed through a robust compliance framework, including a Whistleblower Policy and adherence to regulations.
• Operational Risk: Execution Risk because of low capital model, low entry barriers & high execution burden.

ESG Initiatives and Metrics #

• Environmental: Commissioned operations at Greater Noida with solar capacity of 1,980 KWP. Initiatives include rainwater harvesting, STPs, reduction of carbon emissions through solar panel installations. Supply chain and climate risk assessments are planned.
• Social: Community development projects in healthcare, education, skill training, women’s empowerment, and welfare of senior citizens. Employee training and development programs, including centers of excellence. Emphasis on diversity and inclusion, with the Tirupati factory having 65% women workforce.
• Governance: Strong governance framework, emphasis on diversity and inclusion, and ESG practices. Compliance with the Code of Conduct and ethical business practices.
• Renewable Energy: 14.60% of total electricity from renewable energy sources in FY24. Renewable energy consumption of 15,510 GJ.

Management Outlook #

• Future revenue growth through customer base expansion, maximizing share in mobile phone segment, diversifying the product portfolio.
• Focus on ‘Make in India’ and ‘Design in India’: Aligning with national initiatives to boost indigenous manufacturing and reduce import dependence.
• Expansion into High-Value EMS Sectors: Exploring opportunities in industrial and automotive electronics.
• Deepening Manufacturing Capabilities: Aiming for advanced display module manufacturing and exploring precision components.

Detailed Analysis #

Dixon Technologies (India) Limited - Financial Analysis #

Balance Sheet Analysis - 3-Year Comparative (Consolidated) #

(H in Lakh)

Significant Changes in Major Line Items (>10% YoY) - Consolidated #

• Non-Current Loans(Assets): Increased from H 24,581 lakhs (FY23) to H 45,170 lakhs (FY24), an 83.76% Increase.
• Current Investments: Decreased from H3,000 lakh(FY23) to H 0 (FY24)
• Trade Receivables: Decreased from H 93,066 lakhs (FY23) to H 90,687 lakhs(FY24), a decrease of 2.56% is observed.
• Cash and cash equivalents: Decreased from H4,400 lakh (FY23) to H 1,979 lakh(FY24), Decrease of 54.67%.
• Other Current Financial Assets: Decreased significantly from H 2,518 lakhs (FY23) to H 344 lakhs (FY24).
• Other Current Assets: Decreased from H 5,711 Lakhs (FY23) to H 4,115 Lakhs (FY24), showing a decrease of 27.95% is observed.
• Current Borrowings: Increased from H 2,283 lakhs (FY23) to H 6,034 lakhs (FY24), showing an increase of 164.30%.
• Trade Payables: Decreased from H1,20,490 Lakh (FY23) to H 1,07,650 Lakh (FY24), Decrease of 10.66%.
• Other Current Financial Liabilities: Increased from H 694 lakhs (FY23) to H 1,697 lakhs (FY24).
• Current tax liabilities (net): Decreased from H934 lakh (FY23) to H 267 lakh (FY24).
• Other Equity: Increased from H 1,15,449 lakhs (FY23) to H 1,38,234 lakhs (FY24).

Working Capital Trends #

• Inventory Turnover Ratio: Increased from 11.35 in FY23 to 13.76 in FY24.
• Debtor Turnover Days: Decreased from 48 days (FY23) to 45 days (FY24).
• Trade Payable Turnover Days: Increased from last year 2023 from 4.75 to 4.94.

Asset Quality Metrics #

• Provision for Doubtful Debts/Loans: Increased from H 34 lakhs (FY23) to H 114 lakhs (FY24) for trade receivables.

Debt Structure and Maturity Profile (Consolidated) #

Off-Balance Sheet Items (Consolidated) #

Segment-Wise Financial Analysis of Dixon Technologies (India) Limited - FY24 #

Revenue Breakdown by Segment/Geography with Growth Rates: #

• Consumer Electronics: ₹4,148 Crores (3% decrease YoY)

• Lighting Solutions: 25% decrease YoY

• Home Appliances: 5% increase YoY

• Mobile Phones and EMS: 109% growth YoY

• Wearables and hearables: ₹747 crore

• Security Surveillance Systems: 29% growth YoY

  • Rexxam Dixon Electronics Private Limited(JV): ₹362 crores

• Geographic Breakdown (Consolidated):

  • Domestic (India): ₹16,430.27 Crores
  • Exports: ₹1,260.63 Crores

Cost Structure Analysis: #

• Cost of Materials Consumed:
  • Standalone FY24: ₹5,65,215 Lakhs (FY23: ₹6,15,095 Lakhs)
  • Consolidated FY24: ₹16,14,242 Lakhs (FY23: ₹11,01,517 Lakhs)
• Employee Benefits Expense:
  • Standalone FY24: ₹18,835 Lakhs (FY23: ₹18,382 Lakhs)
• Other expenses: decreased from 27372 lakhs to 24688 lakhs
• Contractor wages and job work charges:
  • Standalone FY24: 11,374 Lakhs
  • Consolidated FY24: 33,197 Lakhs
• Power and fuel:
  • Standalone FY24: 3,387 Lakhs
  • Consolidated FY24: 6,579 Lakhs
• Selling and distribution expenses:
  • Standalone FY24: 3,273 Lakhs
  • Consolidated FY24: 3,349 Lakhs

Margin Analysis (Consolidated): #

• Operating Profit Margin: 3.9% (FY23: 4.2%)
• Net Profit Margin: 2.1% (FY23: 2.1%)

EPS Analysis (Consolidated): #

• Basic EPS: ₹62.84 (FY23: ₹42.92)
• Diluted EPS: ₹62.46 (FY23: ₹42.62)

Quarterly Trends: #

• Information available for Q1, Q2, Q3, Q4 for FY24
• https://emeetings.kfintech.com/

Cash Management Analysis #

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components (Consolidated) #

• OCF (Operating Cash Flow): Increased to H58,431 Lakhs in FY2023-24 from H72,575 Lakhs in FY2022-23.
• ICF (Investing Cash Flow): Net cash used in investing activities was H(53,090) Lakhs in FY2023-24, Increased from H(35,555) Lakhs in FY2022-23. Major components include capital expenditure on property, plant, and equipment, and investments in mutual funds.
• FCF (Financing Cash Flow): Net cash generated used in financing activities decreased significantly to J231 Lakhs in FY2023-2024, reduced from J(18,893) lakhs in FY2022-23.

Working Capital Management Efficiency (Consolidated) #

Calculated on consolidated financials, working capital is negative H(13,935) lakhs during FY 23-24.

• Inventory Turnover Ratio has improved due to a reduction in average inventory.
• Debtor Turnover Ratio declined, indicating a slight decrease in the efficiency of collecting receivables.
• Trade Payable Turnover Ratio slightly increased.

Dividend and Share Buyback Trends (Consolidated) #

• Dividends: The final dividend increased to H5/- per share for FY2023-24 from H3/- per share in FY2022-23. Total cash outflow for dividend payment would be H29.91 Crores.
• Share Buyback: No share buyback activity was reported during the review period.

Debt Service Coverage (Consolidated) #

• The Debt Service Coverage Ratio (DSCR) is 1.22 for FY2023-24, a minor decrease from 1.26 in FY2022-23.

Liquidity Position and Cash Conversion Cycle (Consolidated) #

• Liquidity Position: Current ratio of 1.11 for FY2023-24. Cash and cash equivalents were H20,048 Lakhs.
• The working capital days stood at (8)days as of 31 March, 2024.

Financial Analysis of Dixon Technologies (India) Limited #

Profitability Ratios (3-Year Trends) #

ROE (Return on Equity) #

• FY2024: 25.2%
• FY2023: 22.4%
• FY2022: 28.79% (Approximate)

ROA (Return on Assets) #

• FY2024: 10%
• FY2023: 12%
• FY2022: 14.13% (Approximate)

ROIC (Return on Invested Capital) #

• FY2024: 18%
• FY2023: 23%
• FY2022: 23.79% (Approximate)

Operating Profit Margin #

• FY2024: 3.9%
• FY2023: 4.2%
• FY2022: 4.10% (Approximate)

Net Profit Margin #

• FY2024: 2.1%
• FY2023: 2.1%
• FY2022: 2.64% (Approximate)

Liquidity Metrics #

Current Ratio #

• FY2024: 1.11
• FY2023: 1.18

Efficiency Ratios #

Inventory Turnover Ratio #

• FY2024: 13.76
• FY2023: 11.35

Trade Receivables Turnover Ratio #

• FY2024: 6.98
• FY2023: 7.88

Leverage Metrics #

Debt-to-Equity Ratio #

• FY2024: 0.17
• FY2023: 0.21

Interest Coverage Ratio #

• FY2024: 7.5
• FY2023: 6.6

Working Capital Ratios #

Working Capital Days #

• FY2024: (8) days (Standalone basis)

Net Capital Turnover Ratio #

• FY2024: 46.01
• FY2023: 29.44

Dixon Technologies Business Segment Analysis #

Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Consumer Electronics: FY24 operating profit was ₹141 crores with a 3.4% operating margin. Revenue decreased by 3% YoY. Operating profit contribution was 20%.
• Lighting Solutions: FY24 operating profit contribution was 8%. Revenue decreased by 25% YoY.
• Home Appliances: FY24 operating profit contribution was 19%. Revenue increased by 5% YoY.
• Mobile Phones and EMS: FY24 revenue grew by 109% to ₹10,919 crores. Operating profit was ₹355 crores, up 113%, with a 3.3% margin. Operating profit contribution was 51%.
• Security Surveillance Systems: Revenue grew by 29%. Operating Profit contribution was 2%.
• Wearables and Hearables: FY24 revenues were at ₹747 crores.
• Rexxam Dixon Electronics Private Limited (Joint Venture): FY24 revenue was ₹362 crores with, healthy ROCE.

Market Share and Competitive Position #

• Consumer Electronics: Largest Indian Original Design Manufacturing (ODM) Company in India. Holds sub-licensing rights for Android and Google TV. It has the largest manufacturing facility in Tirupati, Andhra Pradesh.
• Lighting Solutions: India’s largest ODM player in lighting solutions.
• Home Appliances: Largest Semi-Automatic Washing Machine (SAWM) manufacturer for the past 2 years. Manufactured market share of 28% in SAWM and 4% in FATL.
• Mobile Phones and EMS: Fastest-growing EMS Company by revenue. Holds a 60% share in the Mobile EMS Market.
• Security Surveillance Systems: Largest manufacturer in the Indian security surveillance space, with a 45% manufactured market share.

Key Products/Services Performance #

• Consumer Electronics: Rolled out Android-based solutions from Google. Partnered with Samsung to use the Tizen operating system. Commenced manufacturing of Interactive Flat Display panels and digital signage solutions.
• Home Appliances: The new Dehradun facility has an installed annual capacity of 2.4 million washing machine units. Expanded client base for semi-automatic and fully automatic washing machines. Refrigeration segment has the capacity to produce 1.2 million units per annum.
• Mobile Phones and EMS: Produced 15 million smartphones and 38 million feature phones in FY24.
• Lighting Solutions: Introduced new offerings such as floodlights, strip lighting, street lights, and ceiling lights.
• Telecom Division: Increased production of telecom and networking products, including routers and Android set-top boxes for major Indian mobile operators. Secured orders for 5G Fixed Wireless Access (FWA) and 5G CPE devices.
• IT Hardware: Started manufacturing section for laptops and tablets.
• Wearables and Hearables: Recorded revenues of ₹747 crores.

Geographic Distribution and Market Penetration #

• Manufacturing Presence: 23 manufacturing plants across India, located in Uttar Pradesh, Uttarakhand, Andhra Pradesh and Tamil Nadu.
• Market served: Caters to domestic as well as international markets.

Segment-wise CAPEX and ROIC #

• Consumer Electronics: Return on Capital Employed (ROCE) was 54%.
• Lighting Solutions: ROCE was 23%.
• Home Appliances: ROCE was 34%.
• Wearables and Hearables: Experienced healthy operating margin and ROCE.
• Mobile Phones and EMS: ROCE was 59%.
• Security Surveillance Systems: ROCE was 20%.
• Rexxam Dixon Electronics Private Limited (Joint Venture): Experienced healthy operating margins and ROCE.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Expansion of ODM and IFPD products in Consumer Electronics.
  • Expansion into commercial display segment.
  • Expansion of automatic washing machine client base.
  • Upgrading testing labs to NABL standards.
  • Establishment of in-house tool room for mould production.
  • Boost R&D for evolving consumer preferences, with a new Design Center Started.
  • Automation and Digitisation of Factories.
  • Development of Centre of Excellence (COE) for Skill development.
  • Securing new mobile phone brands and expanding manufacturing for rising demands.
  • Backward integration and localization.
  • Robotics and automation in mobile phone and EMS.
  • Expanding security surveillance system capacity.
  • Exploring the manufacture of 4G cameras and routers for the security sector.
  • Expanding manufacturing of Telecom products.
  • Entering the IT hardware segment, with a dedicated manufacturing section for laptops and tablets.
  • Expanding into wearables and hearables.
  • Entered into Refrigerator segment.
  • Finalised technology partner for manufacturing of displays for mobile and IT hardware.
  • Exploring precision components, mechanicals, various other modules, connectors, and cables.

• Challenges:

  • Price erosion and subdued consumer demand impacted the lighting division’s revenues.
  • Increasing competition.

Segment-Wise Financial Analysis: Risk Focus #

Consumer Electronics #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Expansion of ODM and IFPD products, TV Monetisation, focus on Smart TV (Android/Google TV), backward integration (local injection moulding, LED bar utilisation), entering the commercial display segment.
• Control Effectiveness: Partially effective. New product categories and backward integration initiatives are in progress.
• Potential financial impact: Revenue reduced by 3%, Operating Profit contribution - 20%.

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Investment in continuous improvement such as R&D activities to enhance product quality & product efficiency, workforce training.
• Potential financial impact: R&D Center has been set up.

Financial Risks #

• Severity: Medium
• ROCE: 54%
• Trend: Stable
• Mitigation Strategies: Maintaining robust internal controls to ensure data integrity and efficient process, accurate financial reporting.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Strict adherence to national and international regulations. Regular updates of company policies.
• Potential financial impact: Low

Lighting Solutions #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing, due to price erosion and subdued consumer demand.
• Mitigation Strategies: Expanding product portfolio (strip/rope lighting, professional), focusing on smart lighting, growing exports, deepening backward integration in mechanicals.
• Control Effectiveness: Partially effective, new product introductions are ongoing.
• Potential financial impact: Operating Profit contribution - 8%, YoY Growth in revenue (25)%, RoCE 23%

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Workforce training, investment in continuous improvement.
• Potential financial impact: Production capacity of 200 million units for LED lamps, 40 million units for LED battens, 20 million units for LED downlighters.

Financial Risks #

• Severity: Medium
• Trend: Stable
• Mitigation Strategies: Internal controls, Risk Management Policy.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Adherence to ethical operations, regular policy updates.

Home Appliances #

Strategic Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Expansion of automatic washing machine client base, upgrades in testing lab to NABL standards, establishment of in-house tool room, boost R&D, automation and digitisation, development of COE.
• Control Effectiveness: Variable, new customer acquisition and facility upgrades are in progress.
• Potential financial impact: Operating Profit contribution - 19% YoY growth in revenue 5%.

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving
• Mitigation Strategies: Workforce training, investment in continuous improvement, focus on quality.
• Potential financial impact: 28% market share in SAWM and 4% in FATL.

Financial Risks #

• Severity: Low
• RoCE: 34%
• Trend: Improving
• Mitigation Strategies: Internal controls, Risk Management Policy.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Maintaining governance practices for ethical operations, regular policy updates.

Mobile Phones and EMS #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing due to rapid technological changes.
• Mitigation Strategies: Securing new mobile phone brands, expanding manufacturing, backward integration, robotics and automation, development of smart factory.
• Control Effectiveness: Moderately effective, new brand acquisitions and facility expansions are ongoing.
• Potential financial impact: Operating Profit contribution - 51% YoY growth in revenue 109%

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving
• Mitigation Strategies: Investment in continuous improvement, training of workforce.
• Potential financial impact: 60% Share in Mobile EMS Market.

Financial Risks #

• Severity: Low
• RoCE: 59%
• Trend: Stable
• Mitigation Strategies: Internal controls, Risk Management Policy.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Ethical operations, regular policy updates.

Security Surveillance Systems #

Strategic Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Capacity expansion, localization of PCB board, moulding, and IR cut.
• Control Effectiveness: Partially effective, expansion and localization efforts are in progress.
• Potential Financial Impact: Operating Profit contribution - 2%, YoY growth in revenue 29%

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Investment in continuous improvement
• Potential financial impact: 45% market share.

Financial Risks #

• Severity: Low
• RoCE: 20%
• Trend: Stable
• Mitigation Strategies: Internal controls, Risk Management Policy.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Ethical operations, regular policy updates.

Strategic Analysis of Dixon Technologies (India) Limited #

Long-Term Strategic Goals and Progress #

• Aims to be among the top 10 global EMS companies within the next 5-10 years.
• Strategically focusing on “Make in India” and “Design in India” initiatives to enhance global competitiveness and create stakeholder value.
• Expanding manufacturing footprint with new facilities, including a refrigerator plant in Greater Noida and a washing machine plant in Dehradun, resulting in increased capacity.
• Deepening manufacturing capabilities, particularly in displays for mobile and IT hardware, and exploring precision components.

Competitive Advantages and Market Positioning #

• A leading EMS provider in India, with a strong focus on developing and designing industry-leading products.
• A high client retention rate signifies strong customer relationships.
• Strong backward integration, reducing dependency on external suppliers.
• Benefits from government policy support, including approvals for Production-Linked Incentive (PLI) schemes, boosting localized production.
• Expanding into multiple business segments.

Innovation Initiatives and R&D Effectiveness #

• Increasing investments in R&D to develop domestic design solutions.
• A state-of-the-art R&D center for display devices has been set up in Noida.
• Developing best talent pool in supply chain, engineering, NPI and R&D, by building center of Excellence (COE).
• The R&D expenditure for FY 2023-24 was H 1639 Lakhs (H 1210 recurring).

M&A Strategy and Execution #

• Evaluating Merger and Acquistion opportunities to target market entry into Industrial and automotive segment and expanding existing businesses.
• Proposes to acquire a 50.10% stake in IsmartU India Private Limited, which, upon completion, will make IIPL a subsidiary.
• Entered into a term sheet with HKC Corporation Limited for manufacturing of Liquid Crystal Modules and TFT-LCD Modules.

Management’s Track Record in Execution #

• Successfully seeded and scaled up new segments, demonstrating agility.
• The management team has delivered record revenue growth with a high return on capital employed (RoCE).
• Bag order from Lenovo to make notebook.

Capital Allocation Strategy #

• Maintains a conservative financial profile with an optimal capital structure.
• Prioritizes internal accruals to fund investments and has maintained a net debt-free status as of March 31, 2024.
• Capital allocation focuses on capacity expansion in existing business segments and investment in new segments linked to core electronics businesses.
• Maintains a progressive dividend policy.

Organizational Changes and Their Impact #

• Undertaken digital transformation initiatives, including the “Chakra” program and Industry 4.0, to streamline operations and reduce costs.
• Established technology partnerships with global leaders like Dassault, Google, and Siemens.
• The implementation of online Legal Compliance Management System enhances monitoring of compliances on real time basis.

ESG Framework at Dixon Technologies #

Environmental Metrics and Targets #

• Energy Management and Emission Reduction: Dixon Technologies aims to reduce greenhouse gas emissions and increase renewable energy usage, commissioning a 1,980 KWP solar capacity, equivalent to 67,980 matured trees or 137,100 barrels of oil consumed.
• Renewable Energy Consumption for FY 2023-24, stood at 15,510 GJ
• Water Management: The company is actively working to reduce water usage and has implemented rainwater harvesting systems. Specific targets for water consumption reduction are in place, with progress tracked using water intensity measures. The company is using digital water flow meters. Wastewater is repurposed through advanced treatment facilities. Water withdrawl for FY 23-24 is 3,09,223 kL.
• Waste Management: Dixon Technologies targets 100% e-waste recycling by 2032 and operates all manufacturing facilities as Zero Waste to Landfill (ZWL).
• Emission Reduction: The Group is exploring and adopting alternative energy sources to reduce dependency on fossil fuels. It has updated its staff transport bus fleet from BS4 to BS6 standards, aiming for 30% reduction in energy consumption in the A/C System. The Company has set target of reducing the carbon emission, thus leading them to become carbon neutral by 2035.

Social Responsibility Programs #

• Community Development: CSR expenditure for FY 2023-24 totaled H56.3 million. The CSR expenditure to education was 51% of total CSR expenditure, with a 58% YoY increase. The company has also launched an Employee resource group- IM’POWER.
• Human Capital Development: Dixon emphasizes skill-building and knowledge upgrades, fostering a culture of employee involvement, which benefited numerous individuals, senior citizens and students during FY 2023-24.
• Health and Safety: Implemented Occupational Health & Safety practices, Non- Occupational Health and Safety practices. Dixon organizes health camps and workshops.
• Employee Well-being: 100+ employee engagement programs were conducted, and various health camps/workshops. Dixon Technologies achieved ‘Great Place to Work’ certification for the third consecutive year.

Governance Structure and Effectiveness #

• Board Composition: 75% of the Board comprises Independent Directors as of the report date, indicating strong independent oversight. Average board tenure is 11.4 years.
• Board Committees: The Board includes an Audit Committee, Nomination & Remuneration Committee, CSR Committee, Stakeholder Relationship Committee, Risk Management Committee, and an ESG Committee, all structured to enhance governance.
• Shareholders Meeting: The 31st Annual General Meeting (AGM) is scheduled for September 25, 2024, through video conferencing, complying with MCA and SEBI circulars.
• Code of Conduct Compliance: All directors and senior management have affirmed compliance with the Company’s Code of Conduct.
• Succession Planning Policy The Company has a Policy on Succession Planning ensuring the smooth running and operations of the Company.

Sustainability Investments and ROI #

• R&D Investment: The company made significant R&D investments, including the establishment of a new R&D center for display devices in Noida. R&D expenditures for FY 2023-24 was 16 crores
• Digital Transformation: Strategic partnerships with global tech leaders (Dassault, Google, Blue Yonder, SIEMENS, Qlik, Nutanix) support digital transformation and Industry 4.0 initiatives.
• Green Initiatives: Investments in solar power capacity and sewage treatment plants(STPs) reflect a focus on reducing the environmental footprint.

ESG Ratings and Peer Comparison #

• Certifications: The Company references SA8000 certification, demonstrating commitment to ethics and social responsibility, indicating improved productivity, hazard detection, and enhanced reputation.
• The Company have several certifications like - Global Certification in ISO 9001:2015, 14001:2015, 45001:2018, etc.

Regulatory Compliance and Future Preparations #

• Compliance: The Company states full compliance with applicable laws and regulations, including the Companies Act, 2013 and SEBI Listing Regulations. There were no reported instances of non-compliance related penalties.
• Whistle Blower Policy: The Company maintains a Whistle Blower Policy and reports zero whistle blower incidents for FY 2023-24.
• SEBI Mandates: The Company has complied with SEBI circulars regarding PAN, KYC details, and dispute resolution mechanisms for investors.
• Data Privacy: The company has also instituted Dixon Privacy Policy, to promote data security and transparency.
• Future-Proofing: Ongoing engagement with regulatory bodies and industry forums suggests proactive efforts to stay abreast of regulatory changes.

Dixon Technologies (India) Limited: Financial Analysis and Outlook #

Consumer Electronics #

Management Guidance and Assumptions #

Management aims to achieve scale and enhance backward integration for cost-competitive offerings, deepening the level of manufacturing.

Market Growth Forecasts #

The domestic electronics sector shows strong growth potential, aiming to become a key part of India’s manufacturing. The potential electronic market is estimated at USD 3 trillion by 2047.

Planned Strategic Initiatives #

• Expansion of ODM and IFPD products
• TV monetization
• Expanding Smart TV (Android/Google TV)
• Backward integration (local injection molding, LED bar utilization expansion)
• Exploring the commercial display segment
• Strengthen Vertical Integration

Capital Expenditure Plans #

• Establishment of an in-house tool room for mould production
• A state-of-the-art R&D center for display devices in Noida

Efficiency Improvement Targets #

Cost optimization through backward integration in mechanicals.

Potential Challenges and Opportunities #

• Challenges: Price erosion and subdued consumer demand impacted revenues.
• Opportunities: New offerings like floodlights, strip lighting, street lights, and ceiling lights, including a professional range.

Lighting Solutions #

Management Guidance and Assumptions #

The company is taking proactive measures to drive growth.

Planned Strategic Initiatives #

• Expand product portfolio (strip/rope lighting, professional lighting)
• Lead in smart lighting (Bluetooth mesh, Wi-Fi)
• Grow exports
• Deepen backward integration in mechanicals

Capital Expenditure Plans #

Deepening backward integration to optimize costs in mechanicals.

Efficiency Improvement Targets #

Cost optimization through deepened backward integration in mechanicals.

Potential Challenges and Opportunities #

• Challenges: Price erosion and subdued consumer demand.
• Opportunities: Expanding into new product categories and growing exports.

Home Appliances #

Management Guidance and Assumptions #

Focus on backward integration.

Market Growth Forecasts #

Low product penetration rate is stated, implying growth potential.

Planned Strategic Initiatives #

• Expand automatic washing machine client base
• Upgrade the testing lab to NABL standards
• Boost R&D for evolving consumer preferences with a new Design Centre
• Implement automation
• Build of a Centre of Excellence (COE) for skill development by August 2024
• Foray into AI based Fully Automatic Top Load washing Machines

Capital Expenditure Plans #

Establishment of an in-house tool room for mould production (started in April 2024).

Efficiency Improvement Targets #

Automation and digitization of factories.

Potential Challenges and Opportunities #

• Opportunities: Expansion of clients and R&D.

Mobile Phones and EMS #

Management Guidance and Assumptions #

The aim is to secure 35-40% of India’s smartphone market over the coming years, targeting domestic and export markets.

Market Growth Forecasts #

India’s electronic goods market has immense opportunities. The mobile and EMS division is expected to deliver remarkable growth.

Planned Strategic Initiatives #

• Secure new mobile phone brands
• Expand manufacturing for rising demands
• Backward integration and localization
• Robotics and automation
• Development of a smart factory

Capital Expenditure Plans #

Incremental investments to cater to rising demand from exports and new brand launches.

Efficiency Improvement Targets #

Implementation of robotics and automation.

Potential Challenges and Opportunities #

• Opportunity: Expanding customer base and maximizing wallet share in the mobile segment.

Security Surveillance Systems #

Management Guidance and Assumptions #

The target is to deepen manufacturing capabilities.

Market Growth Forecasts #

The segment achieved significant revenue growth.

Planned Strategic Initiatives #

• Expanding surface mount technology (SMT) capabilities with two more SMT lines
• Exploring options to add two more product categories like 4G camera & routers.

Capital Expenditure Plans #

Capacity expansion from 12.25 Million to 21.6 Million units p.a, with localization of PCB Board, Molding and IR cut.

Efficiency Improvement Targets #

Enhanced production capacity through SMT expansion.

Potential Challenges and Opportunities #

• Opportunities: Expanding capacities.

Emerging Business (Telecom, IT Hardware, Wearables, Refrigerators) #

Management Guidance and Assumptions #

The company plans to leverage Dixon’s balance sheet for mergers and acquisitions, with a focus on entering the industrial/automotive market.

Market Growth Forecasts #

• Strong order book in the telecom segment, driven by 5G Fixed Wireless Access (FWA) and 5G CPE devices.
• IT hardware segment is driven by domestic demand and government PLI schemes.

Planned Strategic Initiatives #

• Telecom: Ramp-up production of telecom and networking products, including routers and Android set-top boxes. Start 5G FWA device production in Q1 FY25.
• IT Hardware: Manufacturing laptops and tablets for Lenovo and ASUS, benefiting from PLI 2.0.
• Wearables and Hearables: Production of Bluetooth-enabled speakers and smartwatches, deepening manufacturing with SMT lines for PCBA.
• Refrigerators: Commercial production of refrigerators, in-house product testing facility and implementation of brand production and stock planning.
• Display Modules: Planned manufacture of advanced display modules.
• Precision Components: Exploring entry into the precision components segment.

Capital Expenditure Plans #

• Investment in a dedicated facility for Bluetooth speakers and smartwatches.
• Continued investment in line with PLI commitments in the telecom segment.
• Setting up a dedicated manufacturing section for laptops and tablets.
• Planned capacity of 1.2 million units per annum for refrigerators.

Efficiency Improvement Targets #

MES system implementation in the Wearables and Hearables segment, and integrated in refrigerator manufacturing.

Potential Challenges and Opportunities #

• Telecom segment has a strong, robust order book, investment in line with PLI commitments.

Scenario Analysis and Sensitivity #

Positive Scenario #

Continued strong domestic demand, successful expansion into new product categories, and effective execution of backward integration strategies could lead to exceeding current growth projections.

Negative Scenario #

Intensified competition, slower-than-expected adoption of new technologies (like 5G), or significant delays in the implementation of strategic initiatives (like backward integration) could negatively impact revenues and margins. Supply chain disruptions are a risk.

Sensitivity #

• A 1% fluctuation in foreign currency exchange rates (specifically USD) could have a material impact.
• A 1% change in interest rates would also impact profit.
• The company uses forward contracts to hedge against currency risk.

ESG Focus #

The company highlightes its ESG efforts across various areas, with a specific goal of achieving carbon neutrality by 2035, through enhanced installation of solar panels, amplification of rainwater harvesting and non-usage of plastic bottles.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The auditor issued an unmodified opinion on the consolidated financial statements, indicating conformity with Indian Accounting Standards.
• No qualifications or adverse remarks were reported by the auditors of the Company, its subsidiaries, or joint ventures.
• The auditors of two subsidiaries have submitted audit reports to the Board of Directors.

Key Accounting Policies and Changes #

• The Group prepares the consolidated financial statements in accordance with Ind AS.
• Changes in accounting policies occurred due to amendments in Ind AS 1 (Presentation of Financial Statements) and Ind AS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), impacting disclosure of material accounting policies and definitions of accounting estimates. These did not result in changes in accounting policies but impacted the accounting policy information disclosed.
• Amendments to Ind AS 12 concerning deferred tax assets related to single transactions (e.g., leases) narrowed the scope of recognition exemptions. DTA on “Right to Use” asset and “Lease Liabilities” has been disclosed on gross basis.
• The company uses historical cost basis, except for financial instruments.

Internal Control Effectiveness #

• The Company maintains adequate internal financial controls over financial reporting.
• The systems were reported as operating effectively.
• Internal audit reports are reviewed by the Audit Committee.
• The Company uses an online Legal Compliance Management System.

Regulatory Compliance Status #

• The Company has generally complied with statutory provisions.
• The Company confirmed compliance with applicable clauses of Secretarial Standards.
• The Company confirmed compliance with Listing Agreements and SEBI Regulations.
• The Company has a Whistleblower Policy and a Prevention of Sexual Harassment (POSH) Committee.
• There were no penalties imposed on the group by regulatory bodies during the year.

Legal Proceedings and Their Potential Impact #

• There are pending litigations, as disclosed in Note 39(a) of the standalone financial statements and also mentioned in consolidated financial statement.
• The Company does not expect a material impact on its financial position from these proceedings.
• There were no proceedings initiated or pending against the Company for holding any benami property.

Related Party Transactions #

• Related party transactions were in the ordinary course of business and on an arm’s length basis.
• The Company has a Related Party Transaction Policy in place.
• Approval of Material Related Party Transactions has been sought from the shareholders at the 31st Annual General Meeting, for prospective transactions of the subsidiary Dixon Electro Appliances Private Limited.
• Loans and advances given to related parties total 100% of all such outstandings.

Subsequent Events #

• No subsequent events observed that have a material impact on the Group’s operations.

Analysis of Accounting Quality #

• The Company’s adoption of Ind AS and the external audit provide a basis for assessing accounting quality.
• The absence of material misstatements or qualifications in the auditor’s report supports the reliability of the financial reporting.
• Disclosure of a deferred tax asset related to leases and decommissioning obligations are correctly in compliance with amendments.
• The internal financial controls with reference to financial statements are adequate, and operate effectively.

Regulatory Risk Assessment #

• Compliance with SEBI Listing Regulations and Companies Act, 2013 is maintained.
• There were no instances of non-compliance, penalties, or strictures imposed by regulatory authorities, indicating low regulatory risk.
• The Company has mechanisms, such as the Audit Committee and Whistleblower Policy, in place for compliance and grievance redressal.
• The implementation of an online Legal Compliance Management System further strengthens compliance efforts.
• The company has complied with requirement of furnishing of PAN, Address with Pin, email address, mobile number, bank account details, specimen signatures and nomination by holders of physical securities, based on circulars issued by SEBI.