Optiemus open to tie-ups with global handset firms if it offers long-term benefits: chairman Ashok Gupta 

Ashok Kumar Gupta -Chairman -Optiemus Infracom

Diversified electronics and telecom manufacturing company Optiemus Infracom will only consider partnering with a Chinese smartphone company for a brand-level joint venture if it promises long-term benefits and complies with Indian rules and regulations, chairman Ashok Kumar Gupta has told Moneycontrol.

The Noida-based firm works with smartphone players such as Xiaomi and various hearable and wearable brands. In the telecom space, it has ties-ups with some of the local and multinational gear vendors that supply routers to Indian telcos.

Gupta said the company is in talks with several Chinese brands for local manufacturing partnerships. Optiemus, which has PLI approvals for smartphones, IT hardware, and telecom, is also in discussions with a few Taiwanese companies about tapping into the telecom equipment space, Gupta said. Edited excerpts of the interview:

Chinese companies are seeking Indian partners for manufacturing, distribution and brand partnerships through joint ventures. Are you interested?

We are interested in all three, provided it is long-term. Secondly, there is statutory compliance and every part of the business should be appropriately approved and blessed by the government. The diligence itself can take up to a year and many of these companies have reported losses in India. So, before partnering with them, I need to ensure my business case. Everything needs to be in place with complete transparency. We are experts in manufacturing and distribution but we are not in a hurry and will wait for the right time if the opportunity is long term.

How is the Electronics Manufacturing Services ( EMS) business looking in 2024?

We are doing well in the EMS and telecom businesses and equally well in the hearable and wearable industries.

The IT hardware business started this April and will take some time to take off since there is no supply chain in place. Like us, everyone is struggling with the IT hardware supply chain. Six to seven international brands dominate the supply chain. Until they don't support Indian EMS players, the quantities will not emerge, and thereby, an ecosystem for the supply chain will not be created and the availability of components will not be guaranteed.

Similarly, 75 percent of the mobile handset industry is dominated by Chinese players. Chinese now want to work with Indians. Optiemus is the only company with a PLI balance available, which means Chinese players can benefit from working with us.

We want to work with Chinese handset brands but at the right margins.  We are in talks with several companies regarding smartphones but haven't been able to negotiate the correct terms for doing business.

Simultaneously, we are investing in growing our EMS business and related capabilities to emerge as a formidable player. EMS will be the main focus.

We are making telecom products for a company, which supplies routers to a leading telco and some products for a prominent local teleco gear maker. We also expect wearables and wearables to become big since that ecosystem also comes from China to India. Whoever manages to do quality work will see success in this space.

Do you plan to enter component manufacturing since MeitY is announcing a scheme?

It is only possible when we do component-level work on a cloud kitchen basis, which means many players under one roof are producing for different clients.

In this setup, you will get some price arbitrage. We are talking to several companies. However, to find a joint venture with any company, we must also see how many clients we can sell to. We need scale.

We have done one joint venture with US-based glass maker Corning to set up a Rs 1,000-crore glass factory in Tamil Nadu. It is the first step in that direction.

Several Taiwanese companies are looking to enter the telecom equipment space here but are slightly conservative, unlike Chinese players. But some companies will enter India sooner or later and we want to work with them.

When is the Corning facility expected to start production?

It will start production in the second half of next year. The initial capacity will be 30 million glass pieces but we can increase the production if demand is there.

The factory will serve not only local demand but also export demand. They are part of the global supply chain, and this factory will be part of it. Despite being conservative, they are evaluating other things for the Indian market.

Are you only in touch with Taiwanese companies for component partnerships?

In the absence of China's Huawei and ZTE, there is an opportunity in the telecom space. The demand for routers and outdoor and indoor microwave communication systems is enormous. These companies are evaluating the Indian market for an official foray, and we are in touch with them.

How do you look at the EMS market dynamics? Will you get aggressive concerning new partnerships?

We have burned our fingers in the past and we have been conservative. Even players like Bharat FIH (Foxconn) have faced issues and lost customers. Chinese companies are looking not only for approved companies but also for quality manufacturing capabilities.

They have been comfortable working through their design partners (ODMs) but not Indian EMS. The Chinese business can come through their ODM partners to Indian EMS companies. It is becoming a three-way partnership for mobile manufacturing for Chinese brands' local manufacturing. The two-way collaboration will not work since Indian EMS cannot access the global supply chain.  The Indian market is too big, so that it will offer everyone opportunities.

Chinese ODMs like Longcheer and Huaqin can consider multiple Indian EMS partners to de-risk.

Optiemus has previously made and distributed several international brands such as BlackBerry and HTC. Will you consider helping some global brands return to the Indian market?

Fat marketing budgets are needed for any global brand to re-enter. If anyone tries to bring brands that exited the market, they will be ruined because they will have to compete with companies that are too strong and big. These handset companies have advanced technology and are making for the global market.

So, for low volume demand, you can't sustain it in India. But the need of the hour is support from the Indian government to reserve some space for Indian electronics champions. PLI scheme is a cherry and not the cake. Cake is the supply chain — currently, there is no significant supply chain and we are mainly assembling phones here.

What is the outlook for the overall business?

We expect to earn Rs 2,500 crore by the fiscal end. Last year, we earned Rs 50 crore in profit and this year's performance will be better. We are very careful about our overall investments and do not want to take any risks since EMS is a low-margin business.

What is the company's strategy for the drone business?

For the drone business, we are focusing on agriculture and defence. However, defence has very specific requirements such as mapping and surveying.

Last year, we developed 65 percent of local material in-house, and we launched the drone at a very aggressive price, with a starting price of Rs 225,000 plus GST for agri-drones of 10 litres.

One drone can spray one acre in seven minutes. This year, for rabi and kharif crops, we are deploying 5,000 drones with the support of different government organisations like Indian Farmers Fertiliser Cooperative Limited (IFFCO) and other agencies, and we will deploy 5,000 drones with backup drones and a complete distribution model. We can go to the farmers with applications and provide services to them. We are going to invest around Rs 140 crore in that project. Based on the revenue model, the tentative revenue from these 5,000 drones by December 2025 will be around Rs 600 to 900 crore.

Are you working only with government agencies?

We plan to receive subsidies from organisations like IFFCO and other agencies and collect money directly from the farmer.

Much work involves harmful pesticides and agri-drones can disrupt farming and benefit farmers. The revenue estimation is just for the agri-drone business. We are not calculating the number of drones sold by the defence. It is only on a sale basis, as it's a long process with trials and certifications involved. The defence sale will be an additional Rs 600-900 crore.

How are you pursuing the defence opportunity?

We are filing tenders in different departments. And we are giving trials. We have had initial success.

How much have you invested in the drone business since setting up the subsidiary?

Last year, we said we would invest Rs 25 crore in R&D. This is on track. Optiemus Electronics Limited (OEL) manufactures drones, and Optiemus Infracom Limited (OIL) distributes them.

If a defence order comes in, OEL will manufacture and OIL will supply. We are not considering that investment; as and when we get the order, we will go ahead.

All drones are made in Noida. All electronic parts are made in our factory, while some ancillary work is outsourced. We can make 5000-10,000 10-litre agridrones in this factory a month.

How do you see drones among all other businesses?

The EMS vertical will be our primary focus because we have three PLIs making wearables for several brands. However, our EMS business has a very low margin. You are still determining what will happen and what sort of money you will make by the end of the year. The top line can be there, but the problem is the bottom line.

However, agriculture is one of the most significant areas because of our land areas, including horticulture, floriculture, and cash crops. The young population is interested in something other than farming. Hence, agri-drones will be the next big thing for us and the industry for years.

We are focusing on drone-as-a-service in agriculture. We have yet to decide on the logistics and disaster management business models but you do not need much drone enhancement for these verticals.

We have a team of 20 people for drone R&D, while the rest look after other companies, OEL and OIL. We are creating synergies with the group, and some money will come from the EMS business.