Dixon Technologies has signed a memorandum of understanding (MoU) with Rexxam to form a joint venture. This joint venture (JV) will manufacture printed circuit boards for air conditioners for both, domestic as well as the international market. The joint venture will also apply for the government’s PLI scheme.

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Saurabh Gupta, CFO of Dixon Technologies, said, “We already have an existing relationship with our Japanese partner and now, we are forming a joint venture with them. We have already signed a MoU with them. So currently, our existing business with them is around Rs 130 crore.”

He added, “This JV will ultimately go and apply under the PLI scheme in the next two weeks and we think the revenue opportunity under this PLI should be somewhere around Rs 300 crore annually in the next couple of years. Because we clearly see our Japanese partner catering to some of its supply chain requirements from outside India to India, it can be a good opportunity for both of us.”

On margins, Gupta said, “Margins in our business are of course in single digits. But there have been a couple of reasons for that in Q1, one, of course, because of the adverse operating leverage and the second Covid wave, volumes went down. Second, we have been in a commodity supercycle, where the commodity costs have been continuously impacting us.”

He further mentioned, “However, now to a large extent, we have been able to pass on this cost to principal customers in lighting and washing machine. In the balance OEM business, it gets immediately passed on so there is no challenge there. But clearly, I see with the scale of business now returning back to the normal level, things are looking better. So in July, the business came back to normal levels, and August is even better than July. So, you will see this 2.50 percent margin going to sub 4 percent margins in Q2, and getting even better in Q3.”

On the semiconductor issue, Gupta said, “That is a big concern. There is a big supply chain challenge on the semiconductor side. But clearly, we are in a very strong position. We have a large scale, and we did what we did strategically; we accumulated a lot of inventories for our lighting, LED TV business, as well as our mobile business. So, we are in a good position as compared to our industry peers.”

On inventories, he said, “We took that call to basically accumulate those inventories for semiconductors. So, I would say we are relatively in a better position, but overall, yes, it is a challenge for the entire industry, including us and not only that, the challenges on vessel availability, container availability and delay in shipments are present. So globally, yes, there are a lot of challenges, but we are in a significantly better position as compared to our competitors.”

For the full interview, watch the accompanying video.

(Edited by : Dipika)