Virtuoso Optoelectronics Ltd - A promising micro Cap

Brief introduction about the company

Incorporated in 2015, Virtuoso Optoelectronics Limited manufactures consumer durable goods, assembles a wide array of products, and provides end-to-end product solutions. The company’s current product portfolio of consumer goods includes (1) Split Air Conditioners; (2) Water Heaters; (3) LED Lighting products; (4) cross flow fans; (5) other miscellaneous products such as injection molding components for air conditioners.

In a nutshell it’s a simple plain vanilla small EMS player.

About the promotor : In his own words “Experienced Individual with a demonstrated history of working in the electrical and electronic manufacturing industry. Skilled in AutoCAD, Negotiation, Business Planning, Analytical Skills, and Operations Management. Strong business development professional with a Master of Science (MSc) focused in Engineering Technology from Birla Institute of Technology and Science. “

His previous stint: Worked as a director for Solarcopyer Limited. Not sure if it was a paper company or solar related product manufacturing company.

Promotor is 1st generation entrepreneur and very young.

Let’s talk business:

  • Virtuoso Optoelectronics Pvt. Ltd office and facility located in Nasik (Maharashtra).

  • VOL has started as small EMS player for local (unorganized) companies. Like any other EMS player they have got head start with LED’s ( commodity) that gave them around 70cr topline company in a 3-year span.

  • In LED’s, the company is offering both ODM and OEM. It designs and manufactures the product and offers to the customer.

  • Problems with LED’s business: Orders were very erratic, customer retention rate is very low, to many players with way too much competitive pricing, growth visibility in terms of repeat orders is not there, no loyalty b/n brand owner and EMS player.

  • Above are the problems that the company had faced and hence they diversified the product offerings to where there will be some kind of stickiness and dependence as well as some kind of specialty (not a very hyper competitive market like LED’s) that made them to open new product line called Split Air Conditioners both Indoor and Outdoor.

  • Localization of Indoor AC’s was a recent phenomenon ( just 6years old) there is lot of demand at this time for local players who can manufacture some components (may be all) and provide services. (Demand and supply gap is there)

  • Whereas Outdoor AC’s boom was happened some what around 12 years back and that’s how Amber was born, and market is matured now.

  • VOL started IDU AC’s in 2018, just assembling from 300 AC’s a day to manufacturing 3000 AC’s a day with complete backward integration in plastic injection molding, sheet metal forming, manufacturing heat exchangers and coper tubing, powder coating, wire and harness manufacturing and fans.

  • Quite a journey in short span from pure assembling to a complete end to end solution provider including product design as well. Which is what made them somewhat competitive and differentiated form lot others.

  • In AC’s segment the company is currently transitioning into ODM as well (still very small product design offerings, not a complete product provider).

  • Electronic manufacturing business mainly happens in two ways one is you showcase your capabilities (Initial capital is very high and don’t know capacity utilization) and get the orders from different brands and no fixed contract for recurring topline, and second one is you develop a relation with a brand and be a trusted partner (Like how Mold-Tek Packaging Ltd is to Asian paints is !) and start encroach into other products verticals which the brand offers. (don’t have to create upfront capacity and look for utilization!).

  • Advantages for being the second type model are recurring revenue, customization of product lines, a bit of future revenue estimation, better asset turnovers, no extra overhead costs, no inventory storage, no seasonality effect, you plan your capacities and WC requirements in accordance with the order visibility and you set up new product verticals based on offerings of the brand. Of course, there is no fixed written contract here but more like a “take my word” type and mutual trust. Again, you are not bounded for any one customer, you can offer services to other players as well.

  • Disadvantages are your scope and scale is limited, product customization may not suite for other brands, if brand is not doing well obviously you don’t.

  • Present growth rates are very high that the internal accruals alone are not sufficient to fund the growth, so company took debt around 70cr (8 to 9% int) in 2022 and did a preferential allotment to Kacholia sir (37cr) in the same year.

  • Did around 200Cr topline and expected to do 330 to 350Cr topline in FY23 (close to current Mcap).

  • AC’s contributing around 75% revenue and 25% LED’s and others.

  • 30% raw material is imported from China and 70% locally sourced.

  • 70% backward integrated in IDU’s and 40% backward integrated in ODU’s.

  • Hold on!! Backward integrated doesn’t mean it manufactures everything! including the plastic granules also. It buys plastic granules locally and do the plastic molding for IDU’s.


  • First facility LED’s no idea about capacity ( assuming very less)

  • Second facility 6lakh IDU (utilizing at peak levels) adding additional 2lakh capacity next year.

  • Third facility 2.5 lakh ODU (utilization is around 25% this year (started in Dec 2022 and adding additional 2 lakh capacity next year with a target of 75% utilization)

  • Added fourth manufacturing facility for cross flow fans in March 2023 (~45,000)

  • 40Cr spent for both third and fourth facilities.

  • Planning to come up with large facility (fifth) for two more new electric appliances, details will be revealed in first Qtr FY24 for existing and new customers (Another 40 Cr will be spending on this facility)

  • Overall capacity utilization is around 50% this year (350 Cr revenue), at full capacity utilization
    company can do 700Cr revenue. Targeting around 600 cr for FY 24 and 1000 Cr for FY 25 ( might need small additional funding for this, as current capacity peaks out at 800 Cr)

Margin profile:

  • LED margins ~ 13% , IDU ~ 9%, ODU ~ 7% combined ~ 9%

  • Going forward company is guiding for 9% overall (Including the two-value added new product lines margins ~13%) just 200 bps more than the industry number no MOAT or bargaining power (that’s totally fine as co is not manufacturing rockets!! :upside_down_face:)

Valuations :sunny:

  • At current valuations it’s trading at TPE ~ 48X (335 Cr topline FY23, 8 % margin, interest 11cr, depreciation 7 cr, tax 25%)

  • Company has applied for PLI scheme to both central and state (MH) 35 Cr for 5 years (7Cr/year cash back) and 60 Cr for 10 years (6Cr/year) respectively.

  • Also received ~35 Cr for preferential allotment to Mr. kacholia sir.

  • Company may use this money to reduce the debt or increase the capacity depends on business outlook.

  • but looking at the business momentum MD is looking to expand and grow further. So don’t expect total debt reduction any time soon (makes sense 8-9% interest Vs ROE of ~20)

  • Company has long term debt ~40cr against a fixed block ~100Cr

  • Like another EMS player company needs short term debt to meet WC requirements ( 90 days receivables time)

  • Asset turns for FY 23 was ~ 4times will increase to ~5.5 times for FFY24

  • Can’t take a close valuation call this point of time as there are many moving and critical parts ( debt, PLI, new product lines etc) but conservatively I’m thinking a doubler in 2 to 3 years or 3 to 3.5 times in 5 years.


Current market share is ~ 5% ( 4lakh AC’s), total production in India currently is ~80 lakh units.

  • China is exporting ~80lakhs units every year and a production around 120 lakhs for domestic consumption.

Further Growth:

  • In FY24 company is planning to introduce two more new product verticals (other than AC’s) that might have the same potential as AC’s in terms of topline in the coming three years.

  • Export opportunities


  • Client concentration, 70% revenue is coming from a single client “VOLTAS” in finished AC’s and in LED’s single major client is Panasonic. ( Not surprised, that’s how any micro cap player grows!!)

  • Make in India theme proves to be a fad !!

  • Promotor failed to walk the talk.

Disclaimer: Invested and biased.


Promoters have another listed company called Starlite where performance has been very poor. Any idea on reasons for the same?

Disc- no holdings

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I think he has shut the shop or sold it. He mentioned about the difficulties in LED’s business that’s when and why he started focused on AC’s and other ones. (* Problems with LED’s business: Orders were very erratic, customer retention rate is very low, to many players with way too much competitive pricing, growth visibility in terms of repeat orders is not there, no loyalty b/n brand owner and EMS player.)

Micro cap investing outcome is more like Binary type (0 or 1), Gray shades are always an embedded package in Micro caps you just can’t separate it. The things that we can control is entry price, allocation in pf, company or sector having huge tailwinds, tracking the volumes, any big investor or PE fund entry/exit, basic plant location check. On the number front, If Kacholia’s sir got convinced and took around 10% share in the company means we can assume few things:
1)Company is running real plants not an empty place.
2)Numbers might be true to some extent at least.
3)Promotor has some fire in the belly to ride the make in India theme (He might have failed earlier but that’s ok! what’s important is intent.
4) Company has applied for close to 100Cr for PLI and MH state scheme benefits. (Meaning company is paying taxes, GST and doing business, i don’t think Central gvt just issue PLI cash without some basic checks.)

All we can do is watch how the story will unfold. As the promoter mentioned company is aiming to do 1000cr revenue by FY25 or FY26 so just follow up on that number.
Disclaimer: same as above, low entry price.

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Hmmmm. OK. P/E ratio is 125 not really convinced.

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A very informative interview by the promoter of Virtuoso - Mr.Sukrit Bharati.

The company is an OEM contract manufacturer of ACs for Voltas (75% of topline) and into lighting and EMS segments as well (OEM and ODM).

It expects to generate sales of 325-350 crs in FY23 and 500-550 cr in FY24. Further it did capex of 35-40 cr this year and expects to do capex of 40 cr next year as well.

Expected margins in the range of 7-9% in short term due to more sales coming from lower value added ODU products and long term looking at blended EBITDA margin range of 8-12%.

As per his interviews - Company is conservatively looking at 1000 cr revenue by FY26 and optimistically by FY25.

The comapny exclusively supplies ACs to Voltas (75% of topline). As a business I believe it is a sensible way to increase your presence in contract manufacturing but as an investor, I have personally faced this one customer risk one too many times to currently be interested in this company. For this reason, it didn’t seem that attractive of an opportunity to me.

I am updating this information as I found the video useful for the ones who want to track this company.

Disc. - Not Invested.


The stake by Ashish Kacholia was preferential allotment as per this notice but I am not clear if such allotments can be done to specific individuals for free just to increase the share price as once the news is out that Ashish ji has stake people start buying without thinking that he got it for free.

Q: How do we know if Ashish ji got it for free or he paid?

Preferential Allotment/Private Placement is allowed under Company Law and SEBI Regulations. This is not for free. Trust this clarifies

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Can you please share the source of above PDF please?

Q4 FY 23 concal was held yesterday
Company is confident of aggressive growth for next 2 - 3 years.
revenue guidance of 550 cr for FY24 and 750-800 cr for FY25
management did not provide revenue guidance post that but are confident for it being a multi year growth story- they feel there is a demand supply mismatch as the number of players manufacturing for OEMs are quite less
FY 23 they did 337 cr of sales- 70 cr was from LED, rest from ACs
mostly did IDU( indoor units) - 4.5 lakh and very few ODU (28,000 units)
this year plan to scale up in ODUs as well
IDU they have expanded capacity from 6,00,000 to 8,00,000
ODUC capacity they have expanded from 2.5 lakh to 4 lakh units
they have 30% share with Voltas in IDU- most of this has been gained at the expense of imports.
IDU is slighter higher EBITDA margin than ODU.
realisation wise 1 unit of ODU = 2 units of IDU
no operating leverage can be expected with increase in scale as majority of costs are RM( variable)
FY 24 capex- 60 cr expected
company did not disclose much about the 2 new product lines
can expect 9-10% ebitda margin also going forward and PAT margin of 2-2.5%
will start getting PLI incentives from this year.
it will be roughly 7 cr per year for next 5 years
and also state incentives of 6 cr per year for next 10 years
this years number already includes state incentives of 2.5 cr.
Disc- Invested


Sir pardon me for a very basic question…this PAT margin of say 2% is before the PLI incentives ?? actual PAT comes to 550 x 2%=11 crores plus PLI incentives 11+7+6=24 crores less 2.5 already included this year = 21.5 (we ignore taxation for a while)… Is my understanding correct…
thanks so much in advance

Promoter holding has reduced from 73 to 65 in last Qtr. Do we know the reason?

That is only because of preferential issue of 24.56 lakh shares to Ashish Kacholia and others, promoters havent sold any shares

in fact, company has shown this as receipt from financing activity in their cash flows for FY 23. so it is incorrect to say Ashishji has got it for free

Preferential issue made to few investors

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I think for FY 24 - the incentive could be 8-10 Cr and it could go upto 25 cr in 3 years both PLI and state incentives together. Further, MD also mentioned that part of such incentives would need to be shared with Voltas.

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1)Starlite components is their family owned company, sukrit and his father holds very tiny holding . why they failed is different thing ! important is they have same background.
2)I guess Mr.Kacholiya’s bet is more on promotors profile , PLI scheme (if simplifies if they dont earn anything they will gets 8 - 10 cr profit at end of the year)
3)Are they posting results on yearly basis only? or HFY basis??
4)Why interest component is so high? 14cr on 88cr debt.

Disc. invested

SME companies declare half yearly results. Debt shown is on last day of the qtr. But companies draw working capital as per requirement through the cycle. So interest is calculated on WC utilised. Moreover, we have to see what was the debt last half year/year. This is my understanding.
However, valuation currently appears to be stretched due to recent run up in share price. Also, AC companies, particularly Voltas, are undergoing stressing time. Further, it is a single product company presently. Any addition to product line will increase valuation, so also possible migration to main board.
Not invested. Under watch.


Virtuoso Optoelectronics Q1FY24 update- Targeting 60% revenue growth in FY24.

  1. Revenue growth 91% in AC and 146% YoY in lighting, EMS biz in Q1.

  2. Developed water dispenser, will start supplies in Q4FY24.

  3. Looking to add at least one more product in refrigeration segment.

  4. capacity addition by FY24 end-

  • 60% in ODU
  • 33% in IDU
  • 17% in Lighting
  • 50% in Crossflow fans
  • Fresh capacity in Water dispenser


By adding new products they are trying to reduce seasonality factor in the business.

Big hands(kacholia sir) is having holidings! So I would say another Amber Enterprises in making!

Can someone tell when will this get migrated to mainboard.