Cyient DLM Limited — Q2 FY26

Cyient DLM Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=E0x07ToM4qQ Published: 7 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to Scient Limited Q2 FI26 earnings conference call. As a reminder, 0:10 10 seconds all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:18 18 seconds you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. 0:29 29 seconds I now hand the conference over to Mr. 0:31 31 seconds Krishna Budhanabu, non-executive chairman, Scient DM Limited. Thank you and over to you sir. 0:40 40 seconds Thank you very much and good evening ladies and gentlemen. Uh with me on the call are uh Mr. Rajendrai our managing 0:48 48 seconds director and CEO and Mr. Shinas Kulkarni our CFO. Together we welcome you to our 0:54 54 seconds Q2 FY26 earnings call. Before we begin, I would like to remind you that certain statements during made during this fall 1:03 1 minute, 3 seconds may be forward-looking in nature and subject to risks and uncertainties. A detailed disclaimer is available in our 1:10 1 minute, 10 seconds in our investor update posted on our website. We're pleased to share that our Q2 results demonstrate sustained 1:18 1 minute, 18 seconds positive momentum across all key performance indicators, including order intake, revenue, margin, and cash flow. 1:26 1 minute, 26 seconds This progress builds on the solid foundation established in the previous quarter and strengthens our confidence 1:33 1 minute, 33 seconds in the path ahead. Our order book growth is now firmly on track supported by a robust booktoill ratio sustained for two 1:42 1 minute, 42 seconds consecutive quarters and with an outlook to sustain further into the rest of the year. Our strategic focus on the India 1:51 1 minute, 51 seconds market has strengthened relationships with existing global clients or our strategic focus on the India market and strengthened relationships with existing 1:59 1 minute, 59 seconds global clients has translated into significant wins. We're seeing strong momentum in buildtospec orders and have 2:08 2 minutes, 8 seconds sec secured prestigious awards from glo global OEMs. These design led engagements are currently in development 2:16 2 minutes, 16 seconds and are expected to ramp up to mass production in the coming years, reinforcing our growth strategy and 2:23 2 minutes, 23 seconds further deepening our customer partnerships. 2:26 2 minutes, 26 seconds The revenue potential for B2S projects is long and it is critical because it provides the stability over an extended 2:35 2 minutes, 35 seconds period of time. So it is great to see our order book building up in this regard of P2S projects. We're also 2:43 2 minutes, 43 seconds encouraged by the progress in emerging industry segments especially automotive. 2:48 2 minutes, 48 seconds We have successfully onboarded a new client and several more accounts are in advanced negotiation stages. 2:55 2 minutes, 55 seconds Increasingly clients are engaging us in early stage product development which enhances our value proposition and deepens long-term relationships. 3:06 3 minutes, 6 seconds By engaging in the early cycle, we are able to have a much better control on the supply chain decisions which 3:13 3 minutes, 13 seconds eventually leads to better margins and a more sustained business. Our sales team continues to remain focused and 3:21 3 minutes, 21 seconds optimistic about the promising opportunities ahead. 3:26 3 minutes, 26 seconds Despite some of the challenges posed by global geopolitical developments, we are actively managing these headwinds to minimize impact on operations. 3:36 3 minutes, 36 seconds I think is it is important to note that Israel is a key market for us and the geopolitical situation there has had a 3:44 3 minutes, 44 seconds significant impact both in the quantum of revenue and predictability of revenue where credit is due. And thanks to 3:52 3 minutes, 52 seconds President Trump, we now can expect s stability to return to the region, which will also greatly support uh stability 4:00 4 minutes in our business given the importance of Israel as a market to us. So, we're pleased on what is happening in Israel 4:08 4 minutes, 8 seconds and with some of the stability that is returning in the in the region. 4:14 4 minutes, 14 seconds Our US operations led by Altech remain a strategic advantage providing clients with reassurance and ensuring continuity 4:23 4 minutes, 23 seconds in delivery even in the worst case being close to our customers. This quarter our revenue mix is significantly stronger 4:32 4 minutes, 32 seconds supported by a substantial backlog of high margin orders which enhances our confidence in sustaining and growing 4:41 4 minutes, 41 seconds beyond double-digit margins. I'm pleased and you will see in the financials that we have reported doubledigit AITA margins and we continue to see 4:50 4 minutes, 50 seconds significant traction in those margins with s solid order intake and clear margin visibility. We are confident 4:58 4 minutes, 58 seconds about maintaining this positive momentum going ahead. 5:03 5 minutes, 3 seconds In summary, we are excited about the opportunities on the horizon and are confident that the second half will 5:10 5 minutes, 10 seconds further strengthen our momentum. We remain deeply dedicated to fostering sustainable growth, investing in 5:17 5 minutes, 17 seconds innovation and delivering long-term value to all our stakeholders. Thank you for the continued support and I will now 5:24 5 minutes, 24 seconds invite Rajendra and Shini to share detailed insights on our business and financial performance. Over to you Rajendra. 5:32 5 minutes, 32 seconds Thank you Krishna. Good evening uh ladies and gentlemen. So it was pleasure to welcome you all and kick off our Q2 5:40 5 minutes, 40 seconds result with the business update. As Krishna highlighted Q2 has been an exciting quarter from both business and financial perspectives. 5:50 5 minutes, 50 seconds We have made significant progress across emerging sectors particularly in automotive and buildtospec 5:57 5 minutes, 57 seconds areas. I'm pleased to announce a new logo through a BTS order from a Japanese 6:05 6 minutes, 5 seconds electric vertical takeoff and landing urban air mobility company focused on the future of mobility. So this program 6:14 6 minutes, 14 seconds is currently in the development phase and is expected to enter mass production in the coming year reinforcing our global footprint. 6:23 6 minutes, 23 seconds We also we also secured a strategic win from a key automotive client specializing in EV charging solutions. 6:33 6 minutes, 33 seconds This India based company backed by a global giant uh represents a high potential account with a short sales 6:41 6 minutes, 41 seconds cycle. We are optimistic about this relationship evolving into a multi-million dollar opportunity in the near future. 6:50 6 minutes, 50 seconds In addition, we are in the advanced discussions with several promising companies and we expect some of these to convert into key accounts over the next one or two quarters. 7:02 7 minutes, 2 seconds I think we also strengthened our um u our portfolio of the B2s uh and uh we have made some uh investments in those 7:11 7 minutes, 11 seconds areas and we have seen the order intake from two of the customers in BTS in this quarter. 7:18 7 minutes, 18 seconds All these wins contributed to a robust order intake for the quarter. We reported order intake of nearly 500 crores with a bookto ratio of 1.6. 7:30 7 minutes, 30 seconds So this exceeds the expectation we set in our last call of maintaining a B2B ratio of above one and is a testament to 7:39 7 minutes, 39 seconds the consistency and effectiveness of our sales efforts. For H1, our cumulative 7:46 7 minutes, 46 seconds order intake crossed to 1,00 cr reflecting an year-over-year growth of 220 7:53 7 minutes, 53 seconds uh 9 sorry uh referring growth of 130% year-over-year. So with a strong pipeline and continued traction in the 8:00 8 minutes India market, we expect this momentum to carry into H2 setting the stage for a strong FI27. 8:08 8 minutes, 8 seconds So while we are not providing a formal guidance for FI2X, early indicators suggest that we are well on track to 8:15 8 minutes, 15 seconds resume our growth trajectory and uh on the strategic updates I think I just mentioned about earlier on the 8:23 8 minutes, 23 seconds investments what we already made onto the BTS and in terms of uh some of the inorganic so I'd like to just bring it 8:31 8 minutes, 31 seconds out. Our MDF strategy is focused on uh enhancing client proximity, strengthening um our capabilities and 8:39 8 minutes, 39 seconds assertaining entry into new industries such as rail and automotive. So if you look at our strategy what we just coined 8:46 8 minutes, 46 seconds it as a stack which is strengthen, expand and transform. So strengthen here our focus is uh to mine our existing 8:54 8 minutes, 54 seconds customers and build the strategic clients relationships and focus on the domestic market which we have seen uh where we are just seen some of the 9:03 9 minutes, 3 seconds opportunities where we have already won a opportunity in the electric charging stations and we are some of the offers are in the pipeline which we'll be 9:11 9 minutes, 11 seconds expecting in Q3. So that's what the focus is continuing on the domestic market to grow and the build to spec I just already mentioned some of the gains 9:19 9 minutes, 19 seconds which we had and we strengthening uh build to spec going forward and in the expand in the expand area I think we are 9:27 9 minutes, 27 seconds going to focus mainly on the non A&D sector continuing where what we are doing on the A&D but is on the expansion the non A&D is where most where more 9:36 9 minutes, 36 seconds focus predominantly on industrial medical and uh the automotive in particular the electric the earthquake 9:43 9 minutes, 43 seconds vehicle infrastructure and it was organic just just highlighted earlier. So we are just looking some of the acquisitions the North America and 9:52 9 minutes, 52 seconds Europe regions and on the transform side I think in the product side we have a focus internally 10:00 10 minutes which we have identified the investments we are making it to have our own products which is IP led by us and we continue working on those things in 10:08 10 minutes, 8 seconds expand so that's what we are looking at to transform into IP productled organization and to summarize the probably the order 10:16 10 minutes, 16 seconds inflows are gaining consistent moment So which you have seen able to mean the book to bill ratio of 1.6 in this 10:25 10 minutes, 25 seconds quarter and we also expect for the year as of now what we see is the bookto ratio may go to 1.4 4 to 1.5 for the 10:34 10 minutes, 34 seconds year and the pipeline strength based on the traction what we are seeing it in India and B2 segments are really encouraging H2 outlook is really 10:43 10 minutes, 43 seconds promising setting the stage for the growth to revive year-over-year growth story starting from Q4 FI26 10:52 10 minutes, 52 seconds and margin improvement um is driven by a favorable width and scale which will continue for the next few quarters 11:01 11 minutes, 1 second And uh just on a closing uh if you as you look ahead we are entering a phase where our capabilities global reach and 11:08 11 minutes, 8 seconds sectoral diversification will continue to unlock new growth vectors. Uh with a resilient core and bold vision we are 11:17 11 minutes, 17 seconds confident in our ability to deliver sustainable value to our stakeholders and shape the next chapter of our journey with the purpose and momentum. 11:25 11 minutes, 25 seconds So with that I will now hand over to Shini for a financial update. Thank you. 11:31 11 minutes, 31 seconds Thank you Rajendra. Ladies and gentlemen, thank you for your interest in SQM and in joining the call today. 11:37 11 minutes, 37 seconds I'll walk you through the financials for Q2 initially and then we'll also look at the H1 as a summary. Uh we did a revenue 11:45 11 minutes, 45 seconds of 310.6 crores which signifies a growth of degrowth of 20% yearonear. 11:52 11 minutes, 52 seconds um our order backlog as Raja indicated we had a order intake of close to 500 crores in Q2 which means we have added 12:01 12 minutes, 1 second another 159.3 crores uh to the order book right so further increase in the 12:06 12 minutes, 6 seconds order book to uh 2291 crores u aida is 312 million or 31.2 growth. Uh despite 12:16 12 minutes, 16 seconds the year-on-year degrowth in revenue, we've been able to keep the AIDA almost flat. The reason being the expansion in 12:23 12 minutes, 23 seconds margins uh and uh so it's it's a more than 100 basis points increase sequentially and 192 basis points 12:32 12 minutes, 32 seconds increase in margins year on year. Uh now this margin growth is despite the loss of volume. So that means this uh even 12:41 12 minutes, 41 seconds though we had under absorption because of the volume loss we've been able to uh get to a double digit beta margin 12:48 12 minutes, 48 seconds because of the quality of revenue and what I want to assure you here is the order backlog that we see has a has a similar quality of revenue so that as we 12:56 12 minutes, 56 seconds grow the business we will see this further expanding. Uh we reported a profit of 32.1 cr or 321 million rupees. 13:05 13 minutes, 5 seconds uh this is 108% growth year on year. 13:08 13 minutes, 8 seconds However, I want to call out a an event which is not normal uh and therefore we are reporting the normalized fat as well 13:17 13 minutes, 17 seconds here. Uh as you all remember we had made an acquisition about a year ago and there was certain performance conditions 13:24 13 minutes, 24 seconds to which the earnouts were tied. Uh and uh those performance conditions have not been met. Therefore the earnout is reversed in the books which comes in as 13:32 13 minutes, 32 seconds other income giving us an extraordinary gain time. Uh I want to assure you that the acquisition is intact. The company's doing well. Uh it's just that the 13:41 13 minutes, 41 seconds performance condition is not met. So we are looking at you know Altech as a very key acquisition and a milestone for the 13:50 13 minutes, 50 seconds company and and it does position us very well for growth in the US markets. Um with that the normalized PA margin was 13:58 13 minutes, 58 seconds 4% which is a 8 bits increase but uh the reported profit margin was quite high because of the one one time item at 10.3%. 14:11 14 minutes, 11 seconds Looking at the revenue trend, uh I think as you can see the growth trajectory is back in Q2 compared to the uh last 14:19 14 minutes, 19 seconds quarter. Uh we also have EITA growing in Q2 compared to Q1 and the AITA percentage is reaching a double digit 14:26 14 minutes, 26 seconds number. uh the fat has broken into two parts there which is included the normal fat as well as the reported fat and and 14:33 14 minutes, 33 seconds uh that's what you see in terms of trend and uh looking at other metrics which are critical for our business our order 14:43 14 minutes, 43 seconds back book is now showing a continuous uh this is the third quarter where you're seeing a continuous increase in the order book uh as Rajendra highlighted we 14:51 14 minutes, 51 seconds have had more than thousand cr worth of order book order intake in the first half of the uh and and and taking into account the 14:59 14 minutes, 59 seconds revenue that is reported the net increase in order book is significantly positive. 15:05 15 minutes, 5 seconds Uh we've also made some improvements in the DIIO in the second quarter. Uh you'll see this seasonality the Q1 numbers are usually low and therefore 15:13 15 minutes, 13 seconds the all the metrices around the net working capital show an elevated number but we see improvement as we go through the year. So we see that the net working 15:22 15 minutes, 22 seconds capital has actually dropped to 139 days from 165 days. This also means that we have generated positive cash. This is 15:29 15 minutes, 29 seconds the fourth quarter in a row where we have had positive FCFs. Now the reported FCF is 27 crores but that that that's 15:37 15 minutes, 37 seconds also because there is a land acquisition in my for building our own factory which is resulted in in that reported number 15:45 15 minutes, 45 seconds being a little lower than what the operational free cash flow is which is 46%. 15:49 15 minutes, 49 seconds um we see improvements in DSO we see improvements in uh uh you know the customer advances as well and all this 15:56 15 minutes, 56 seconds has positively contributed to the networking capital for the current u some of the mix that we've been seeing 16:05 16 minutes, 5 seconds in the past uh you we see the industry mix on on the left side where we we aerospace is about 37% defense is 8% 16:13 16 minutes, 13 seconds industrial is 30 and medical is 16%. If you remember this from a year ago, this was very different. This was very heavy on aerospace defense. This is close to 16:22 16 minutes, 22 seconds 70% of our business. But with the acquisition of Altech and the growth we are seeing in industrial and metric segments uh in the rest of the business, 16:30 16 minutes, 30 seconds this is a much healthier portfolio and a mix that we are comfortable with as we go along. uh we we are also uh focused 16:38 16 minutes, 38 seconds on expanding this industry mix into other area uh which uh without compromising the whole uh you know the 16:45 16 minutes, 45 seconds characteristics of a low volume high mix from a product category standpoint we see higher mix of box builds coming into 16:53 16 minutes, 53 seconds our business and the box build year-on-year growth stands at around 34%. uh and then the because of that the 17:00 17 minutes PCBA mix has declined. This this this also argues well for the business because box tends to be more sticky in nature. It it's also slightly higher 17:09 17 minutes, 9 seconds margin than the traditional PCBA u and the geography I think India 17:16 17 minutes, 16 seconds continues to grow for us with the large order coming down. I think we had a significant uh India business ramp down 17:24 17 minutes, 24 seconds but as we grow the rest of the India business we'll see a higher mix going forward. Currently we are tracking to 17:31 17 minutes, 31 seconds about 85% rest of the world and a 14% India. 17:39 17 minutes, 39 seconds Uh this is a slightly detailed view of the financials. Uh I will not go through all the details here. uh important thing 17:47 17 minutes, 47 seconds here is from a uh reporting perspective I also want to highlight the the effective tax rate appears to be low 17:54 17 minutes, 54 seconds because the other income that came because of those extraordinary gains are not uh in the nature of the of a normal 18:02 18 minutes, 2 seconds profit it's a capital more on on account of capital gain and therefore excluded from the purposes of 18:08 18 minutes, 8 seconds taxation and if you remove that then our ETR stands at 25.8% 8% which is in line with the earlier reports. Other than 18:16 18 minutes, 16 seconds that I would only say um the employee cost and other expenses have increased Y due to the inclusion of US operations 18:24 18 minutes, 24 seconds which are which which generally the employee costs there tends to be higher than uh the the the resources in India 18:32 18 minutes, 32 seconds but but the net number to look that there is the AIDA which is a double digits and a healthy growth of 192 basis points year round. 18:40 18 minutes, 40 seconds Uh we also have provided a summary of H1 financials. Uh this this gives further color on on on how we are doing on on a 18:49 18 minutes, 49 seconds half yearly basis. As you all know there is some seasonality in the business. 18:52 18 minutes, 52 seconds Typically our businesses tend to be between 40 to 45% in H1 and 55 to 60% in H2. We we expect a similar trend in the 19:01 19 minutes, 1 second current year and therefore it makes sense to measure first of last year with the first of the current year. When you look at that I think even even from that 19:09 19 minutes, 9 seconds yard stick the bit margin has increased by a healthy 157 basis points and uh no even the normaliz is lower because of 19:18 19 minutes, 18 seconds the volume drop. We are recovering from that uh loss of business steadily as you can see the sequential growth coming into the business and by the end of this 19:26 19 minutes, 26 seconds year we will would have completely uh you know overcome from that loss of business resulting in a yearon year growth as well. 19:36 19 minutes, 36 seconds Last chart is on the IPO fund utilization. I think we are almost at the in the third anniversary after the IPO and have used up most of the funds 19:44 19 minutes, 44 seconds that that that were raised uh know and and then uh the only only one that that needs to be sort of spent a little more 19:51 19 minutes, 51 seconds is on the cap capital expenditure. We will keep updating you in the coming days on how that is sort of you know 20:00 20 minutes that is getting played out but we are healthily placed at 93% utilization of the cash that was raised during the uh 20:09 20 minutes, 9 seconds we also have healthy cash balance uh despite the IPO money getting exhausted we are comfortably placed today to fund 20:16 20 minutes, 16 seconds any growth that might come in the company so with that I'll we'll open the floor for Q&A so back to work. 20:25 20 minutes, 25 seconds Thank you very much sir. We will now begin with a question and answer session. Anyone who wishes to ask questions may press star and one on 20:34 20 minutes, 34 seconds their touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two. 20:41 20 minutes, 41 seconds Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. 21:00 21 minutes The first question is from the line of Balas Subramanyan from Aryant Capital. Please go ahead. 21:08 21 minutes, 8 seconds Uh good evening sir. Thank you so much for the opportunity. Sir my first question. We have added a new logo in the EV space. uh given the volatility in 21:17 21 minutes, 17 seconds the EV market uh like uh uh like uh which are the seg sub segments we are focusing on uh within EV like uh charge 21:26 21 minutes, 26 seconds char charging infrastructure power train and I just want to understand what kind of margins uh uh uh we are getting in 21:32 21 minutes, 32 seconds the EV space and how these orders are soft 21:39 21 minutes, 39 seconds my first question sir this is Yes. You said about Japanese 21:46 21 minutes, 46 seconds customer EV that is electric vertical take off and landing correct as 21:52 21 minutes, 52 seconds automotive EV char that's why okay so if you're asking about that uh automotive infrastructure 22:00 22 minutes uh the EV charging so there basically EV charging stations so we are working out in terms of some of the uh assembly sub 22:09 22 minutes, 9 seconds assemblies which goes into the electric charging stations which are available today right now in the public uh area. 22:16 22 minutes, 16 seconds So that's where we got an order from one of the customers in India. 22:21 22 minutes, 21 seconds Yeah. To further elaborate on that point, we are going to go into that part of the automotive sector which is sort of on the infrastructure side of things 22:30 22 minutes, 30 seconds uh which are not the margins are quite comparable with the rest of the business. 22:37 22 minutes, 37 seconds Okay sir. Uh sir uh this regarding this oil tech requisition I think it's been increased material cost employee and 22:45 22 minutes, 45 seconds other expenses significantly which impacted our profitability and when we can expect uh uh our tech operations uh 22:52 22 minutes, 52 seconds will achieve profitability and what kind of synergies uh uh we can expect uh maybe what kind of time frame uh we can expect. 23:02 23 minutes, 2 seconds Yeah. So right now we have some of the opportunities going on with Altech with our unit there in US in Torington. So 23:10 23 minutes, 10 seconds some of our existing customers we have submitted some of the quotes and they are in the positive uh direction. We will be affecting some of those orers 23:18 23 minutes, 18 seconds will be coming in this quarter and similar thing we also seeing the synergy coming from their side to us here too. 23:24 23 minutes, 24 seconds So where they are working with one of their customers we are seeing some synergies here in India too. Okay. So that's why the synergies are happening 23:31 23 minutes, 31 seconds from both the sides and mainly from uh existing BLM India we are seeing a lot of synergies happening into the attack. 23:42 23 minutes, 42 seconds Okay sir on that uh uh build to spec side uh I think we are targeting 5 percentage of revenue by this year and 23:50 23 minutes, 50 seconds uh I just want to understand uh uh what are the factors uh to scaling uh this business uh I think it's a high margin 23:58 23 minutes, 58 seconds business so what are the factors to scaling uh uh in this business and we when we can expect uh it's more than 15% 24:06 24 minutes, 6 seconds kind of contributions um uh maybe in next two to three years time frame if you uh if you if you could share more clarity on this business. 24:16 24 minutes, 16 seconds I think uh the contribution going to the number what you said will take lot of time. Okay. But what we have currently 24:23 24 minutes, 23 seconds is the contribution I mean whatever the share of the business the BTS so it will increase in FI27 based on what we have 24:30 24 minutes, 30 seconds today which I said which one of the one I mentioned about the BT for a Japanese customer. I think last quarter we just 24:38 24 minutes, 38 seconds mentioned about uh one another US based company where we had the BTS activity. I think there are the few of other things 24:46 24 minutes, 46 seconds which are in the pipeline and we definitely see that our PTS revenues will go up in FI27 and compared to what we have currently. 24:57 24 minutes, 57 seconds Okay sir. So my last question on the defense and aerospace side defense has grown significantly. Aerospace has grown 25:05 25 minutes, 5 seconds significantly while defense has impacted because of their large one order completions and I just want to understand is there any broader delays 25:13 25 minutes, 13 seconds in defense recruitment cycles and what is the visibility on new defense program awards. 25:21 25 minutes, 21 seconds So right now I think we are still working out with the customer uh whom we worked in the past. So still they did not get their orders from the Indian MOD. So we are just working with them. 25:31 25 minutes, 31 seconds So once they have it, I think probably we'll be getting those offers back to us. Okay. 25:40 25 minutes, 40 seconds Thank you ladies and gentlemen. In order to ensure that the management will be a able to address questions from all the 25:48 25 minutes, 48 seconds participants in the conference, kindly limit your questions to two or three questions per participant. Should you have a follow-up question, please rejoin 25:56 25 minutes, 56 seconds the queue. We will take the next question from the line of Pravin Sahai from PL Capital. Please go ahead. 26:05 26 minutes, 5 seconds Yeah, thank you for opportunity. Uh my first question is related to the margin. 26:09 26 minutes, 9 seconds Uh on the sequential basis there is improvement in the margin. Uh while uh the contribution from the aerospace or medtech which I believe is a higher 26:18 26 minutes, 18 seconds margin business contribution is declined QQ. So is that the industrial uh business which you are doing have a higher margin as compared to the other segments? 26:32 26 minutes, 32 seconds No, I think most of the businesses are quite homogeneous. I think the margin profiles across the industries that we have have are quite comparable. So it's 26:41 26 minutes, 41 seconds the overall mix that has changed right in the in the order book that we have today where there was up to last year 26:49 26 minutes, 49 seconds there was one large customer with a large order with low margins and that that has gone away the the mix of the 26:57 26 minutes, 57 seconds business is favorable now in terms of the margin expense. 27:01 27 minutes, 1 second Okay. Uh second question is uh related to the standalone business which is 40% down and that is only because of the one 27:09 27 minutes, 9 seconds large defense order or is there something else too also? That's completely because of that one particular order only. There's no other event leading to that. 27:20 27 minutes, 20 seconds I think last one out the growth of the rest of the business has been 50% or so. It's been very significant 15%. 27:32 27 minutes, 32 seconds Mhm. Uh last questions are related to the order book because uh last quarter you highlighted uh around uh 500 515 odd 27:41 27 minutes, 41 seconds cr of order intake and out of that 50% was executable uh you know in the FY26. 27:50 27 minutes, 50 seconds So is that the part you started executing the last uh quarter Q1 order intake? 28:00 28 minutes Yeah, the Q1 order intake will be executed over this Q2, Q3, Q4. That's what we said around 50% of that order of 28:07 28 minutes, 7 seconds the $60 million will be executed between Q2 to Q4. 28:12 28 minutes, 12 seconds So which is and that's yeah sorry which is in the pipeline right now. So 28:19 28 minutes, 19 seconds for our H2 revenues whatever we have is based on some of the others which we got in Q1. 28:26 28 minutes, 26 seconds Okay. Okay. Is there any part in this quarter? 28:30 28 minutes, 30 seconds Yeah, whatever whatever we got in Q2 ordered in that 1/4 of be happening uh in H2. 28:39 28 minutes, 39 seconds Okay, got it sir. Thank you and all the best. 28:44 28 minutes, 44 seconds Thank you. We'll take the next question from the line of Summit SA from Mquari. Please go ahead. 28:52 28 minutes, 52 seconds Yes, thank you. Uh first question as it relates to uh Altech. Can you talk about Altech in the broader context of the 29:00 29 minutes geopolitical environment? I know you mentioned about Israel but can you just talk about uh you know the new tariff situation and 29:09 29 minutes, 9 seconds your exposure to that and uh you know what's the underperformance at Altech and uh if you can talk about the clients 29:16 29 minutes, 16 seconds the inbound inquiries that you're getting over there. Then I have a follow-up question primarily relating to B2S about what sort of investments are 29:24 29 minutes, 24 seconds you planning to make here and how do you see your value proposition improving uh because of B2S and if you can talk about 29:31 29 minutes, 31 seconds the margin uh higher margin versus the core business. Thank you. 29:38 29 minutes, 38 seconds Okay. So on um on the historic so what know what I think for some of our customers we're also working out with 29:46 29 minutes, 46 seconds them in terms of executing some of the work from alte okay so we we are just working with them so where they are also 29:54 29 minutes, 54 seconds interested to see that whether how effectively I mean basically since we already working on working uh on those products so they they 30:04 30 minutes, 4 seconds basically feel that it is easy to transition from India to us to manufacture those products. So we are working out to ensure that they won't be 30:13 30 minutes, 13 seconds losing any of the gains here. So probably they'll be seeing some momentum and some gain here by moving from India to US. So we are 30:21 30 minutes, 21 seconds looking out for some other things otherwise for rest of the customers we have not seen any major impact in terms of the size. Uh yeah 30:30 30 minutes, 30 seconds and on your second on the second question which you asked about the P2S investments the investments which you said we are making right now the 30:38 30 minutes, 38 seconds investments we are doing it for the last I think the four five years we are investing on this and we are seeing some of those things right now which we are 30:46 30 minutes, 46 seconds already manufacturing the revenues are coming right now for us so that's what we are seeing those 5% of the revenues in this year so we will be seeing some 30:54 30 minutes, 54 seconds of those things the revenues going up So our investments will continue. I think we are also doing our own IP product IP. 31:02 31 minutes, 2 seconds So there also we are putting the investment and we are developing the design and products on our own. So then going back to the customers and working 31:09 31 minutes, 9 seconds with them to win some of the things. So we have anchor customers available in those uh IPled products. So which we are working right. 31:18 31 minutes, 18 seconds Got it. Thank you. 31:24 31 minutes, 24 seconds Thank you. The next question is from the line of Vipra Shastav from Philip Capital. Please go ahead. 31:33 31 minutes, 33 seconds Hi sir, I'm audible. Yes. Yeah. Yes. 31:36 31 minutes, 36 seconds Uh yeah. Okay. Thank you. Uh speaking on the other current liabilities which has gone up which is the customer advances 31:44 31 minutes, 44 seconds which has gone up. So you know that last time it went up. 31:48 31 minutes, 48 seconds Sorry to interrupt you Mrs. Shvastav your audio is not clear sir. 31:54 31 minutes, 54 seconds I would request you to use your handset please. Uh hello you can hear me now. Yes sir please proceed. 32:03 32 minutes, 3 seconds Sure. Uh yeah so the other uh the customer ad has gone up. Uh because of that obviously the network capital 32:10 32 minutes, 10 seconds improved sir. So last time it went up because of the particular kind of order we had from the defense client. So this 32:17 32 minutes, 17 seconds time any specific reason why it has gone up or is it the kind of orders we should expect in coming quarters? Any thoughts on that? 32:25 32 minutes, 25 seconds No, I mean we constantly look for opportunities to seek advances from our customers. It's not unique and specific to one different customer that we had. 32:33 32 minutes, 33 seconds Even with our customers, whenever we expect a slightly longer, you know, sort of inventory blockage than what is what 32:42 32 minutes, 42 seconds is what is within the threshold of our pricing, we do go and seek that. So it's it's a we have we we've been able to get some advances from other other clients. 32:53 32 minutes, 53 seconds Sure. Sure. Uh as quickly on the uh side I mean uh in the coming quarters what 33:01 33 minutes, 1 second kind of fraction are you seeing there as the uh geopolitical situation in Europe helping you out? What kind of prospect you're seeing on the aerospace side? 33:12 33 minutes, 12 seconds No, I mean not the I think not specific to the geopolitical situation. I think it has its own uh 33:19 33 minutes, 19 seconds sort of way it plays out but I would say we are seeing traction in the in in our business overall not just uh in North 33:27 33 minutes, 27 seconds America but also in Europe right and so that that we we are on a growth trajectory and that will continue in Q4. 33:33 33 minutes, 33 seconds nothing specific. In fact, the some of the recent last couple of days what we have seen on the the Gaza Hamas 33:40 33 minutes, 40 seconds situation like with Israel, I think that should help us further, right? Because I think some of the while while there's not no major disruption to the business, 33:50 33 minutes, 50 seconds I believe some of the decision- making has slowed down. So that should come back into into the forefront again. So 33:57 33 minutes, 57 seconds we we we will see positive changes uh going for sir. And so last question from my end uh 34:04 34 minutes, 4 seconds you know this uh Japanese evol customer which we have landed you know what kind of ramp up to you expect from them and how many years you can expect them to start contrib. 34:15 34 minutes, 15 seconds So this is basically the BTS project. So initially we are just working out right now doing the BTS design. So the actual 34:24 34 minutes, 24 seconds happen only after two and a half to three years it will take but it continues for 9 years we are done. Okay. 34:32 34 minutes, 32 seconds sir. Thank you. 34:37 34 minutes, 37 seconds Thank you. We'll take the next question from the line of Bhavik Ma from JP Morgan. Please go ahead. 34:44 34 minutes, 44 seconds Hi, thank you. Uh so a couple of questions. Firstly, it's nice nice to see an order book improving couple of quarters, but how should we think about 34:52 34 minutes, 52 seconds the duration of this order book in terms of you know conversion to revenues? Are this more like 18 to 24 months order which leads to faster conversion or 35:00 35 minutes these are like more longer duration organized the revenue conversion should be more gradual. 35:06 35 minutes, 6 seconds I think the one which means some of the orders most of the orders are 18 months to 24 months and where wherever we have 35:13 35 minutes, 13 seconds the B2S orders which we just said there that is initially the design work I think um the yeah I think even that also 35:20 35 minutes, 20 seconds will be only within the less than two years whatever we order right now. Yeah. 35:27 35 minutes, 27 seconds Okay, got it. The second question is can you break out the order book in terms of the different verticals like which vertical is driving a lot more orders 35:35 35 minutes, 35 seconds compared to others just you know rough split of the order book uh as per your four verticles 35:44 35 minutes, 44 seconds I think it's quite similar to our current revenue mix I don't see we don't see any significant shift in the composition of the order compared to our 35:51 35 minutes, 51 seconds current mix today the only addition is uh the the about 20% of the orders are coming in from the built to spec which uh is very encouraging as far as we are 36:00 36 minutes concerned because we are pushing that business more and more. So yeah I mean B2S tends to have a longer gestation cycle as I explained there is a there is 36:09 36 minutes, 9 seconds a design element to it and therefore the sales cycles are a little longer but they tend to be secure and very 36:16 36 minutes, 16 seconds long-term in nature right once you the production starts it's about 10%. The only other thing I'll say in this quarter that's very encouraging for us is automotive. I think we had a very 36:25 36 minutes, 25 seconds good order significant order coming in from an automotive customer. This is a segment where we consciously put efforts efforts to uh you know sort of expand our portfolio. 36:38 36 minutes, 38 seconds Okay. Got it. Thank you. 36:42 36 minutes, 42 seconds Thank you. The next question is from the line of Pam Bura from Pimeitra Asset Managers. Please go ahead. 36:50 36 minutes, 50 seconds Hello. Uh thank you for giving me this opportunity. So what I wanted to ask was uh what is company exactly doing to you 36:59 36 minutes, 59 seconds know broaden the customer base and reduce dependency on top five clients and are there any targets or timelines for this diversification. 37:08 37 minutes, 8 seconds Yeah, I think um as you have seen in terms of expanding the non A&D sector is where we are working out and we also 37:16 37 minutes, 16 seconds have the sales team which is based in right now focusing on the new customers. 37:21 37 minutes, 21 seconds So we are seeing some of those things in the pipeline. So there are a lot of the orders on the pipeline uh in terms of new customers where we are driving and 37:30 37 minutes, 30 seconds also the focus on the Indian Indian based customers. Okay. So we'll be seeing those trends in the next Q3 Q4. 37:38 37 minutes, 38 seconds So most majority of the things will be happening from the India based and the new customers. 37:43 37 minutes, 43 seconds Okay. And another question is like uh there's a visible shift towards strengthening Indian operations. So do 37:51 37 minutes, 51 seconds you see India becoming main growth engine and will exports always dominate? 37:56 37 minutes, 56 seconds Is there a scenario where India's share could exceed exports? 38:01 38 minutes, 1 second India. So India we focusing in India but our exports will be the I mean probably if you look at the mix exports will be 38:09 38 minutes, 9 seconds the highest then comes to the India. So so India market growth we are seeing a good growth in India right now. based on 38:17 38 minutes, 17 seconds the opportunities what we have in the pipeline. So we'll continue to focus on India and at the same time I think our aerospace and defense is our core where 38:25 38 minutes, 25 seconds we'll be strengthen those things and focus on the non India customers both particular in industrial and sector. 38:34 38 minutes, 34 seconds Okay. Okay. Thank you. 38:38 38 minutes, 38 seconds Thank you. The next question is from the line of Adira Singh from Amus Capital. Please go ahead. 38:46 38 minutes, 46 seconds Uh good evening sir. Uh a couple of questions. Uh first on the order book. 38:53 38 minutes, 53 seconds Uh so I just want to understand in the next uh uh 6 months how much of the order book are we planning to execute? 39:03 39 minutes, 3 seconds I mean from the Q2 whatever we got it you said yes uh outstanding. So 2300 39:11 39 minutes, 11 seconds is what I see. So how much of this would be executed in the next uh two quarters QCQ4? 39:17 39 minutes, 17 seconds No, we will not be able to provide that specific number because that would then amount to giving the guidance guidance on the revenue itself. So I we'll what 39:26 39 minutes, 26 seconds what I'll just say is there's a healthy amount of that order that is executable for the for the currency. 39:32 39 minutes, 32 seconds Uh okay. Uh my second question is on the uh on the uh US business. So how much of 39:40 39 minutes, 40 seconds the revenue uh do we get from the US market and uh with this tariff coming in you had mentioned that some of the 39:48 39 minutes, 48 seconds customers uh you are not having discussion the business is going as usual. So what is the reason for that? 39:54 39 minutes, 54 seconds are you the sole supplier or uh what would be the reason and secondly with the customers you are having the 40:01 40 minutes, 1 second conversation uh they are looking to move the supply chain to the US itself or you are working out some uh uh some other uh 40:10 40 minutes, 10 seconds you know uh destination like let's say going to Vietnam or I don't know so something if you can help me understand 40:17 40 minutes, 17 seconds so our US business is roughly I think for this year we expect 40% of our business to come from the Right. And uh look, I think there are 40:26 40 minutes, 26 seconds many many conversations going with going on with customers to see how we can offset the impact of the tariffs. There is no one solution. It works differently 40:34 40 minutes, 34 seconds for different customers. Some customers want us to change the ship to location to where their customers are so that the product is prepared there. Some others 40:43 40 minutes, 43 seconds are just paying the tariff right now from their pocket and they're waiting for some change to happen in the regulations. A few others are trying to 40:51 40 minutes, 51 seconds see if we can route the products differently uh and through through through different geographies. So I mean 40:58 40 minutes, 58 seconds there is no one solution frankly it's a very customer specific and it depends on the usage of the part as well. So we are we are open we are discussing with all 41:07 41 minutes, 7 seconds of the customer obviously we will not be able to pay the tariff ourselves given the low margins in this business. It has to be solution that we work out with the 41:16 41 minutes, 16 seconds customer to support Sure, understood. Thank you. 41:25 41 minutes, 25 seconds Thank you. The next question is from the line of Maitric Sha from Sapphire Capital. Please go ahead. 41:32 41 minutes, 32 seconds Yeah. Hello. Good evening. Am I audible? Yes, ma'am. Please proceed. 41:37 41 minutes, 37 seconds Yeah. Uh so my first question is the audit that we currently have. What percentages from the ma'am? Sorry to interrupt you. Can you 41:45 41 minutes, 45 seconds uh keep your mic a little bit farther from your mouth because there is an airy disturbance which is coming. Yeah. Is this is this is this fine? 41:52 41 minutes, 52 seconds Yes ma'am. Please continue. 41:54 41 minutes, 54 seconds Yeah. What the percentage of to spec order do we have in our order backlog? 42:03 42 minutes, 3 seconds No the question was not clear. 42:07 42 minutes, 7 seconds So our share of business orders what is the percentage in the backlog currently? 42:15 42 minutes, 15 seconds What is the percentage of backlog? 42:16 42 minutes, 16 seconds You're not very clear about the question. 42:19 42 minutes, 19 seconds Percentage of bill to spec orders in our backlog. 42:21 42 minutes, 21 seconds Ma'am, I'm sorry to interrupt you, but if you will use your handset, that would be Yeah, I I am using my handset. Is this not Hello. 42:30 42 minutes, 30 seconds Okay, ma'am, please. But you got the question. I'll respond. 42:33 42 minutes, 33 seconds I think your basic question is how much is bit to spec in the overall order book that we currently have. Yeah. Correct. Correct. Yes. 42:43 42 minutes, 43 seconds So, so, so we do have uh more than 10% of the order book in build respect in the current order. 42:50 42 minutes, 50 seconds And how do we see it growing forward in the next 6 months for FI26? 42:56 42 minutes, 56 seconds Absolutely. We see it growing healthily because we uh we are focusing on build spec as as a focus area as far as we concerned. I think that's how we 43:04 43 minutes, 4 seconds differentiate ourselves compared to some of the other competitors that are there in the space. design capability is very unique to S DM. I don't think anybody 43:12 43 minutes, 12 seconds can boast of having such a large design setup to service our client with a large know experience we have working with 43:20 43 minutes, 20 seconds clients. They also trust us on giving full design to us. So it's a focus area. 43:25 43 minutes, 25 seconds We are growing. We seeing a lot of traction in fact there's a very healthy sales pipeline that we are working on and we expect business to grow quite 43:32 43 minutes, 32 seconds quite uh knowily going forward. the quantification by the end of FI26 but do we see this in our order? 43:42 43 minutes, 42 seconds I mean it will be hard to quantify because I think it all depends on the win rate and the customer cycle etc. 43:48 43 minutes, 48 seconds What I can show you tell you is that it's on a growth trajectory and we'll continue to see growth. 43:53 43 minutes, 53 seconds Okay. And uh so the BTS orders going into mass production do we have any idea of how many contracts do we see them going into mass production next FI27? 44:05 44 minutes, 5 seconds So almost all of them will go into mass production but not in FI27. These have long long design cycles. I think the 44:12 44 minutes, 12 seconds first manufacturing order you might see is from 28 onwards. But some are already happening now. 44:17 44 minutes, 17 seconds Small things small ones are actually currently in 27 as well but a lot of the the bulk of the manufacturing orders will come in little later. 44:28 44 minutes, 28 seconds Um yeah and uh now that we expecting a growth quarter on quarter happening uh in the revenues do we see a a 4Q yi 44:38 44 minutes, 38 seconds growth for this year or will that happen in the first quarter of FI27? 44:44 44 minutes, 44 seconds Yes. Yes. We are absolutely working towards that and we expect the growth coming in the fourth quarter of this year. 44:51 44 minutes, 51 seconds Fourth quarter or first quarter? 44:54 44 minutes, 54 seconds Fourth first quarter of the current financial. 44:56 44 minutes, 56 seconds Okay. you do see our foot and this will be more heavily so less from the defense side and more from the industrial side of the business. Is that correct? 45:05 45 minutes, 5 seconds Yeah. Yeah. That's correct. 45:08 45 minutes, 8 seconds So we do see the Qoq margin improvement as well happening. Yes. Yes. Okay. Okay. Thank you so much. 45:18 45 minutes, 18 seconds Thank you ladies and gentlemen. We will take that as the last question for today. I would now like to hand the conference over to Mr. Krishna Budhanapu 45:27 45 minutes, 27 seconds for closing comments. Thank you and over to you sir. Thank you very much and uh I just uh uh want to thank the leadership team and acknowledge what we've achieved 45:36 45 minutes, 36 seconds uh this quarter uh with uh we've refreshed the be revenue uh at least the order book is completely refreshed um 45:44 45 minutes, 44 seconds with a much better margin revenue which gives us confidence that we will maintain the double digit ea margins at least or into the foreseeable future and 45:53 45 minutes, 53 seconds really grow the double digits because this time we barely scratched 10 but we we strongly believe that that will grow. 45:59 45 minutes, 59 seconds the team has uh made sure that the backlog is built in such a way that we will grow some very good business uh both good margin bit of print business 46:07 46 minutes, 7 seconds but also what what you heard about which is the B2S business uh some of the contracts that we're talking about run into 20 years which gives us the 46:16 46 minutes, 16 seconds stability to then uh aggressively grow the rest of the business so B2S is important for multiple reasons uh one of 46:23 46 minutes, 23 seconds which is of course the control we have over the supply chain the stability of the business and the longevity of the business and I can assure you that after 46:32 46 minutes, 32 seconds what uh after a tepid across Q1 we've seen some good growth in Q2 and this growth will only accelerate continuing 46:39 46 minutes, 39 seconds to the rest of year. So I just think it's it's appropriate to pass on what the board said and complement the management team on where we stand but I 46:47 46 minutes, 47 seconds want to assure you that a lot better times are coming and uh we are saying this based on our um on our order book and where we see the business. So thank 46:56 46 minutes, 56 seconds you very much for your support and we will again speak um next time after the results. Thank you. Thank you members of the management. 47:04 47 minutes, 4 seconds Ladies and gentlemen, on behalf of Scient DM Limited, that concludes this conference. We thank you for joining us and you may now disconnect your lines. 47:13 47 minutes, 13 seconds Thank you.