Cyient DLM Limited — Q4 FY26

Cyient DLM Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=P5ESAaPGfl4 Published: 3 weeks ago

0:01 1 second Ladies and gentlemen, good day and welcome to Sign DM Limited Q4 FY26 earnings conference call. As a reminder, 0:08 8 seconds all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:16 16 seconds you need assistance during the conference call, please signal an operator by pressing start then zero on your touchstone phone. Please note that 0:24 24 seconds this conference is being recorded. I now hand the conference over to Mr. Krishna Bodhanapu, non-executive chairman, Scan 0:31 31 seconds DM Limited. Thank you and over to you, sir. 0:35 35 seconds Thank you. Uh, good evening ladies and gentlemen. I'm Krishna Bodhanapu, non-executive chairman of Scan DM. I welcome all of you to our Q4 FI26 0:45 45 seconds earnings call. Joining me today are our managing director and CFO Mr. Rajendrai or sorry, managing director and CEO Mr. 0:53 53 seconds Rajendrai and our CFO Mr. RM Subramanyam. Before we begin, I would like to remind you that certain 1:00 1 minute statements made during this call may be forward-looking in nature and subject to risks and uncertainties. A detailed 1:06 1 minute, 6 seconds disclaimer is available in our investor update section posted on our website. 1:13 1 minute, 13 seconds I'll start by first sharing my perspective on a few key developments in FI26 and more importantly how we're positioned as we step into FI27. 1:23 1 minute, 23 seconds On reflection, FI26 was a poor year on a growth perspective and I think that is a reality that stares us. Having said 1:31 1 minute, 31 seconds that, I'm happy to say and we will talk about it in more detail that we end the year strongly with a strong Q4 and a 1:40 1 minute, 40 seconds strong order book uh that will or a strong backlog and order book that helps us deliver well into the coming years. 1:47 1 minute, 47 seconds Let's start with the order book momentum which remains a strong anchor for our confidence over the course of FI26. 1:54 1 minute, 54 seconds We've witnessed consistent and healthy order intake across our focused industry segments. Each quarter we had a bookto 2:02 2 minutes, 2 seconds ratio of greater than one which ends up at being 1.5 times for the full year. 2:08 2 minutes, 8 seconds The ability to sustain the strong order book uh through the booktoill ratios reflects not just the demand conditions 2:16 2 minutes, 16 seconds but also the effectiveness of our customer engagement model, our service offerings and our focus on long-term programs. I'm happy to say that the 2:25 2 minutes, 25 seconds order intake is the highest or the order backlog is the highest that has it has ever been which bodess well for the coming year um ahead. 2:35 2 minutes, 35 seconds Equally importantly or I'd even say more importantly is the quality of the order book. We are increasingly winning programs that are more complex, more integrated, critical to our customers. 2:46 2 minutes, 46 seconds Now these uh uh engagements come with longer life cycles, greater collaboration, higher barriers to entry. 2:53 2 minutes, 53 seconds All of this sustains or substantiates the durability of our growth. What this also means, the type of programs that 3:00 3 minutes we're working on means that we will continue to have better predictability and better profitability, which as you 3:08 3 minutes, 8 seconds know is very important uh to the sustainability of our business or for that matter any business. Margins this 3:14 3 minutes, 14 seconds year at 10 plus% were very good and we believe that that will sustain into the future. A key driver behind this 3:23 3 minutes, 23 seconds momentum has been our focused effort to support and strengthen the sales organization. Over the past few years, 3:31 3 minutes, 31 seconds over the past year, we've hired some very good sales leaders across geographies and industry verticles. And this enhances both our reach and the 3:40 3 minutes, 40 seconds depth. This has helped us to progress meaningfully from being just a manufacturing partner to being a value editing value adding strategic partner. 3:49 3 minutes, 49 seconds I'll say we continue to hire sales team uh and good sales leaders um and we continue to see some very good benefit 3:57 3 minutes, 57 seconds which will translate into again the coming year. 4:02 4 minutes, 2 seconds Being a good value ad strategic partner is relevant in the segments we focused on where selling is relationshipdriven. 4:09 4 minutes, 9 seconds It is technically intensive and as you know it comes with long consultation cycles. With a stronger leadership bench 4:17 4 minutes, 17 seconds and more structured go to market approach. We believe now we're putting into place a sales team that is well 4:24 4 minutes, 24 seconds positioned to convert and execute a very very strong pipeline into FY26 on top of a good year for order intake and a very 4:33 4 minutes, 33 seconds strong order backlog that we start the year with. Of course, we've had challenges this year uh obviously the uh 4:40 4 minutes, 40 seconds the significant geopolitical uncertainties that have characterized this year uh with initially with the scare with 4:48 4 minutes, 48 seconds tariffs and or with the uncertainty I would say with tariffs and now and what continues is the crisis in West Asia. 4:55 4 minutes, 55 seconds Some of our customers have been directly impacted and this has led to temporary disruptions in schedules and execution 5:02 5 minutes, 2 seconds plans in Q4. Of course, there is a stress um and and it's hopefully a cyclical stress in the electronic 5:09 5 minutes, 9 seconds component availability uh with what's happening in the memory sector and we end up given the complexity of our boards, we end up using memory in a lot 5:18 5 minutes, 18 seconds of our boards. Also, 60 plus% of our revenue comes from exports and therefore the global uh geopolitics and the global 5:26 5 minutes, 26 seconds in um uh in issues have a disproportionate um impact on on us. Of 5:33 5 minutes, 33 seconds course, this despite these headwinds, we performed strongly. We did well on our delivery commitments. We protected customer confidence and we responded 5:42 5 minutes, 42 seconds with agility across supply chain and execution. 5:46 5 minutes, 46 seconds Another positive we're seeing is the structural shift in the growing traction in the buildtospec engagements which are 5:55 5 minutes, 55 seconds higher value engagements. While build to print or EMS remains an important part of our of our portfolio, customers are 6:03 6 minutes, 3 seconds incre increasingly seeking partners who can engage earlier in the value chain contributing to specifications, 6:10 6 minutes, 10 seconds manufacturing decisions, um suppliers, uh part selections and of course the entire life cycle management which includes things like service um etc. 6:22 6 minutes, 22 seconds These wins reflect the trust customers place in our engineering depth, process rigor, and governance. 6:29 6 minutes, 29 seconds On the subject of margins, of course, I'm thrilled with the company's ability to sustain healthy double-digit performance. As you know, this has been 6:37 6 minutes, 37 seconds our our intent and our ambition. And u I'm happy to say that this year we we um ended with 10 plus% uh EITA margin 6:46 6 minutes, 46 seconds across the whole portfolio including the operations in India and the operations in the US. This is the first time uh 6:53 6 minutes, 53 seconds that we have ended with 10% plus EIDA margin for the entire year and we believe that we are in a very sustainable uh situation. 7:03 7 minutes, 3 seconds Of course uh this is uh not by chance. This is through deliberate uh actions. Uh we've focused on the right segments. 7:10 7 minutes, 10 seconds We've invested in operational excellence and of course we've maintained discipline and cost and execution. We remain clear that margin sustainability 7:19 7 minutes, 19 seconds is as important as growth and our objective is not short-term optimization but building a robust business model 7:26 7 minutes, 26 seconds that will deliver long-term value for all our stakeholders. I can again confirm that we continue to invest where it is needed uh especially on sales 7:35 7 minutes, 35 seconds especially on on technology which will all lead so some very good outcomes over the years. As we look ahead I am 7:43 7 minutes, 43 seconds particularly engaged by a strong entry into FY27 the order book the pipeline maturity 7:50 7 minutes, 50 seconds early ramps all gives us measured confidence as we go into the new financial year. Of course there are 7:58 7 minutes, 58 seconds global uncertainties but we are quite confident that structurally we have a very strong business. Obviously India's 8:05 8 minutes, 5 seconds growing role in global electronics increased defense spending rising electronic content all bolds all bodess 8:12 8 minutes, 12 seconds very well for science DM and presents meaningful opportunities. 8:17 8 minutes, 17 seconds Before I hand over for the business update, I would like to thank our employees for their dedication, our customers and partners for their trust 8:24 8 minutes, 24 seconds and you our investors for your continued support. Thank you once again and I will turn it over to Rajendra to talk about the business. 8:35 8 minutes, 35 seconds Thank you Krishna. So good evening to all of you. Um I'm Rajendrai. um just I will quickly walk you through some of u 8:43 8 minutes, 43 seconds uh areas of the achievements in terms of business. So first I would like to talk about give a concise overview that 8:50 8 minutes, 50 seconds covers three critical areas. One is the current EMS industry outlook and its primary the driver demand drivers 8:58 8 minutes, 58 seconds notable highlights and milestones recently achieved by SCM and our forward thinking uh strategic 9:06 9 minutes, 6 seconds road map I mean road map organized around the pillars of strengthen expand and transform. So to just begin uh let us look at the industry perspective. 9:17 9 minutes, 17 seconds The global EMS market is poised for robust expansion with projections indicating growth from approximately 650 9:25 9 minutes, 25 seconds billion in 2025 to nearly $1.1 trillion by 2033 a solid kagger of 6%. 9:35 9 minutes, 35 seconds This trajectory is fueled by a confluence of long-term structural trends that is accelerating electronification and digitization 9:43 9 minutes, 43 seconds across multiple sectors. Increasing defense expenditures worldwide. 9:49 9 minutes, 49 seconds Shifting geopolitical landscapes that prompt supply chain realignment and localization. 9:57 9 minutes, 57 seconds The rapid emergence of AI and supporting infrastructure and a market rise in domestic investments within India particularly in defense and dry. 10:08 10 minutes, 8 seconds Geographically the demand is distributed broadly. APAC leads 40% followed by North America at 35 and Europe at 25%. 10:18 10 minutes, 18 seconds Segment wise consumer and IT remain dominant trailed by industrial while automotive, aerospace and defense, 10:27 10 minutes, 27 seconds medical and rail are collectively gaining strategic importance as growth drivers. The key takeaway here is that 10:35 10 minutes, 35 seconds the EMS industry benefits from enduring multi-year demand setting the stage for sustained disciplined growth. 10:45 10 minutes, 45 seconds Shifting focus to assign DLM's recent accomplishments, we have made significant strides on multiple fronts. 10:53 10 minutes, 53 seconds At the integrated electronics manufacturing interconnection event which was held in the beginning of uh last quarter 11:01 11 minutes, 1 second scan DLM recognized by the global electronic association and also achieved top honors in the 11:09 11 minutes, 9 seconds fiercely contested hand soldering championship where our participant emerged victorious among a field of international competitors. 11:20 11 minutes, 20 seconds These echoes underscore our dedication to excellence and are a testament to the ongoing investments we make in quality training and process maturity. 11:32 11 minutes, 32 seconds On the automotive front, we have successfully completed the international automotive task force audit and secured 11:39 11 minutes, 39 seconds the letter of confirmation further enhancing our credentials. 11:45 11 minutes, 45 seconds In addition, we have commenced series supply for a new automotive product line and initiated series production for a semiconductor mission supply partner. 11:56 11 minutes, 56 seconds These are not preliminary trials but full scale repeatable production endeavors signaling our growing 12:03 12 minutes, 3 seconds capabilities and reinforcing our entry into more rigorous customer environments. 12:10 12 minutes, 10 seconds We continued order and take momentum in Q4. As Krishna said, I am pleased to share that we secured an order intake of 12:18 12 minutes, 18 seconds over $28 million for the year, resulting in a robust book to bill ratio of 1.5x. 12:26 12 minutes, 26 seconds This performance is a clear testimony to our focused strategy and execution in our key markets. 12:33 12 minutes, 33 seconds We witnessed a good traction across major industries reinforcing the diversification and resilience of our 12:40 12 minutes, 40 seconds business model with the continued strengthening of our sales organization. 12:44 12 minutes, 44 seconds So we are confident that this momentum will further improve as we move into FI27. 12:51 12 minutes, 51 seconds So if looking ahead um over the uh our strategy is structured into three phases as I said earlier. So strengthen, expand and transform. 13:02 13 minutes, 2 seconds If you look at in the strengthen our immediate focus is on fortifying our core. This involves deepening our presence in key markets, pursuing 13:11 13 minutes, 11 seconds operational excellence and strengthening our build to spec capabilities. 13:16 13 minutes, 16 seconds Tactically, we are enhancing our goto market structures, building crossunctional teams, pursuing large deals and new client logos and investing 13:25 13 minutes, 25 seconds in automation to support scalable disciplined growth. 13:30 13 minutes, 30 seconds If if you look at the expand section, the next stage target selective growth avenues particularly in automotive, 13:37 13 minutes, 37 seconds Indian defense and AI infrastructure manufacturing. We are also aiming for vertical integration across cable, sheet 13:44 13 minutes, 44 seconds metal and missioning broadening both our market reach and manufacturing depth while capitalizing on global industry tailwinds. 13:54 13 minutes, 54 seconds If you look at on the transform finally we aim to move beyond conventional EMS models by developing products and 14:02 14 minutes, 2 seconds platforms investing in product organization capabilities and forging technology partnerships and MUS. This 14:10 14 minutes, 10 seconds phase is designed to unlock new long-term strategic opportunities and additional growth levers. So in summary 14:18 14 minutes, 18 seconds um the EMS industry continues to present a promising landscape bolstered by mega trends like digitization increased 14:25 14 minutes, 25 seconds defense spending supply chain localization and the rise of AI infrastructure scan DLM's recent milestones 14:34 14 minutes, 34 seconds particularly in automotive and semiconductor underscore our momentum our fasure road map strengthen expand 14:42 14 minutes, 42 seconds transform charts a clear and disciplined path for growth through through the years. And looking ahead for FI27, the 14:51 14 minutes, 51 seconds company remains focused on operational excellence, margin improvement, and deepening strategic customer relationships supported by a strong 15:00 15 minutes pipeline and order book. And we continue investments in capabilities and go to market. So thank you for your continued 15:07 15 minutes, 7 seconds support and interest in Sign DM. Now I hand it over to our RMS, our CFO. 15:14 15 minutes, 14 seconds Thank you Rajendraas. Good evening ladies and gentlemen. Uh this is Aram Subraman and let me uh take you through the financial 15:23 15 minutes, 23 seconds performance of Q4 FI26 and the fullear performance for the quarter revenue stood at 3,691 15:31 15 minutes, 31 seconds million rupees reflecting a strong growth over previous quarters in the financial year. On a year-on-year basis, 15:38 15 minutes, 38 seconds it is down by 13.8% 8% mainly due to the large order closure in Q4 FI25. 15:44 15 minutes, 44 seconds We also observed some moderation in customer uptake due to Estasia crisis and project execution tracing getting extended. That said, from a demand 15:53 15 minutes, 53 seconds perspective, we are encouraged by the underlying pipeline and the order inflows. 15:58 15 minutes, 58 seconds Coming to the order book, we ended the quarter with a strong order book of 24,166 16:05 16 minutes, 5 seconds million rupees with INR 672 million uh net addition during the quarter. The 16:12 16 minutes, 12 seconds order book reached its highest level in last 10 quarters. It is really encouraging as it gives us a good visibility moving into FI27. 16:22 16 minutes, 22 seconds AITA for the quarter is INR 431 million down 24.9% yearonear and the PAT came in 16:29 16 minutes, 29 seconds at INR 224 million at 27.6% decline year on year while the year-on-year 16:36 16 minutes, 36 seconds comparison reflects the impact of lower revenues and operating leverage. It is important to highlight the sequential strength and profitability is improving 16:45 16 minutes, 45 seconds at a margin level. EITA improved 11.7% and PAT stood up 6.1%. Both EITA and PAT 16:53 16 minutes, 53 seconds margin are the highest compared to all previous quarters of the year reflecting focused execution on operating efficiency and margin accredited business mix in Q4. 17:04 17 minutes, 4 seconds Let me now walk you through our fullear financial performance for FI26. Revenue stood at INR 12,615 million representing 17:13 17 minutes, 13 seconds a 17% year-on-year decline. The softness is caused by the one large A andd order completion during FI25. This is also an 17:21 17 minutes, 21 seconds year of moderated demand across certain customer programs and deliberate execution phasing. However, the business demonstrated strong operating resilience 17:30 17 minutes, 30 seconds through the through the year despite the softness. On the profitability front, normalized AIA after factoring one hours 17:37 17 minutes, 37 seconds of wage code impact and M&A expenses stood at INR 1,32 million, a decline of 17:45 17 minutes, 45 seconds 10.2% yearonear while reported aa stood at INR 1,268 million down 12.6% 17:54 17 minutes, 54 seconds yearonear. Importantly, margins remain stable at double digit driven by an improved business mix and tight control 18:02 18 minutes, 2 seconds over operating expenses. At the bottom line, normalized path after factoring earnout impacts for FI26 was INR 563 18:12 18 minutes, 12 seconds million down 24% yearonear largely reflecting operating need leverage and normalization adjustments. However, 18:19 18 minutes, 19 seconds reported PT increased by 7.7% yearonear to 733 million with margin improving to 5.8% up 133 basis points year on year. 18:31 18 minutes, 31 seconds Coming to the order book, we close FI26 with a record order book of INR 24,166 18:39 18 minutes, 39 seconds million which is INR 5,15 million higher than last year. This is the highest order book levels for us since 2 and a 18:46 18 minutes, 46 seconds half years. This is providing us a strong revenue visibility and a confidence as we enter into FI27. 18:53 18 minutes, 53 seconds In summary, FI26 for a year of was a year of subdued revenue. However, we sustained double-digit EITA margins and 19:00 19 minutes built a record high order book. These factor underlined the robustness of our operating model and position as well for a gradual recovery and profitable growth in the coming year. 19:12 19 minutes, 12 seconds This slide captures the quarterly trend of revenue and margins. Starting with revenue, we saw steady ramp up through 19:19 19 minutes, 19 seconds FI25 peaking in QI Q3 FI25 followed by a moderation in FI26. Despite the softer 19:26 19 minutes, 26 seconds revenue environment in FI26, the quarterly trend shows a sequential improvement towards Q4 FI26 reflecting a 19:34 19 minutes, 34 seconds gradual normalization in customer schedules and improved execution momentum as the year progressed. The margin follows similar trend as revenues 19:43 19 minutes, 43 seconds with gradual improvement sequentially in FI26. While EITA moderate in early part of FI26, we saw a strong recovery in Q4 19:51 19 minutes, 51 seconds FI26. Same is the case with PAT as it shows a healthy upward trend after the start in FI26. Softer start in FI26 20:00 20 minutes profitably improved sequentially culminating in INR 224 million in Q4 FI26. To summarize, while re revenue 20:08 20 minutes, 8 seconds trends were subdued, both EITA and PT margin show a clear upward trajectory particularly in the second of year. This 20:15 20 minutes, 15 seconds reinforces our confidence in the structural strength of the business and our ability to convert growth into profitable outcomes as volumes recover. 20:27 20 minutes, 27 seconds The next slide highlights the quarterly trend of our nonpel metrics. Starting with the order book, I mentioned earlier that we see a clearer and consistent 20:35 20 minutes, 35 seconds upward trajectory. The order backlog has increased from about INR 21.3 billion in 20:41 20 minutes, 41 seconds Q1 FI25 to INR 24.2 billion by Q4 FI26 making it as the strongest level the company has seen for quite some time. 20:51 20 minutes, 51 seconds Inventory days remain elevated through FI26 largely driven by advanced stocking for the long components and program rampups. Importantly, we are seeing 20:59 20 minutes, 59 seconds reduction in Q4 reflecting tighter material planning and improved execution alignment. DSO has improved steadily moving from the low 90s to the mid70s 21:08 21 minutes, 8 seconds driven by stronger collection and billing discipline. DPO on an average is higher in FI26 compared to FI25. 21:17 21 minutes, 17 seconds During the FI26, we saw elevated working capital typical of the ramp up and revenue moderation phase. As we move into Q4 and forward, we are seeing 21:25 21 minutes, 25 seconds clearer signs of normalization with sharper control on inventory, stable receivables, and a healthier cash conversion cycle. We expect to improve it further as we move into FI27. 21:39 21 minutes, 39 seconds In terms of revenue share, from an industry perspective, aerospace, industrial, and medical continue to be our largest contributors. Defense share 21:47 21 minutes, 47 seconds is low and having year-on-year decline of 68% due to large order coming to an end in FI25. The others segment shows 21:54 21 minutes, 54 seconds stronger growth largely aided by B2S business. From a product category standpoint, PCBA remains the largest 22:01 22 minutes, 1 second contributor at around 48% of the revenues reflecting its continued strength across industry segment. It is also encouraging to see the box bill 22:08 22 minutes, 8 seconds revenue shing up. Others category recorded strong growth supported by B2S and value added offerings. 22:15 22 minutes, 15 seconds Geographically, the rest of the world continues to account for over 90% of the revenues driven by strong demand across four industries. we operate. It is 22:23 22 minutes, 23 seconds expected to remain same in the near term. Overall, the Q4 mix reflects a balanced portfolio, increasing contribution from strategic programs and 22:31 22 minutes, 31 seconds strong overseas demand which positions us well moving forward. 22:36 22 minutes, 36 seconds The next slide is a financial detail overview. This slide provides a detailed P&L view for the quarter. As mentioned earlier, revenue is lower year on year 22:45 22 minutes, 45 seconds due to large order completion in FI25 and moderate uptake from few clients due to West Asia crisis. However, the quality of the revenue significantly 22:53 22 minutes, 53 seconds improved along with supply chain efficiencies. As a result, we post a healthy double- digit margins at 11.7%. 23:00 23 minutes Although it is lower by 174 basis points year on year, the traction is sustainable and hence provides more confidence moving into FI27 23:08 23 minutes, 8 seconds with better control in finance charges and benefits from other income normalized path stands at INA 224 million. a significant growth 23:17 23 minutes, 17 seconds sequentially but a decline 27.7% year-on-year due to strong Q4 FI25. 23:25 23 minutes, 25 seconds Next slide. Revenue for the year is INA 12.6 billion down 17% year-on-year growth primarily impacted by the 23:33 23 minutes, 33 seconds completion of a large order in the previous year and delayed ramp ups in few programs. Material cost are lower year on year mainly due to improved revenue mix. With the revenue 23:41 23 minutes, 41 seconds contribution from high margin business increasing, we see the strength sustained. The overall margin in FI26 have improved due to business mix and better supply chain efficiencies. 23:53 23 minutes, 53 seconds Normalized debita stands at 10.3 77 bits higher year on year. Reported margin also improved to 10.1% up one or three 24:01 24 minutes, 1 second basis points. At the bottom line, normalized pad declined to find INR 563 million due to operating leverage and onetime cost during the year. However, 24:10 24 minutes, 10 seconds reported part increased by 7.6% to 733 INR 733 million with 5.8% margin up 133 24:18 24 minutes, 18 seconds basis points year on year. Overall, despite revenue headwinds, FI26 demonstrate margin resilience, discipline, cost management and 24:26 24 minutes, 26 seconds improving profitability positioning as well as revenues recover. 24:32 24 minutes, 32 seconds The slide is on ebitita and patwalk. The slide explains the bridge from a reporter to normalized margins. The first one off relates to M&A evaluation expenses amounting to INR 17.75 million. 24:43 24 minutes, 43 seconds We incurred the expense to evaluate a deal that did not go through. The second one is the wage impact totaling to INR 16.4 million resulting from the new wage 24:51 24 minutes, 51 seconds code by government of India. The third item is the reversal of earners from the earlier amendment. All these expense above are exceptional nature and not 24:59 24 minutes, 59 seconds reflective on normal business. The pwalk reflects the tax impact of this adjustment as well. 25:06 25 minutes, 6 seconds Next slide. In terms of IPO proceed utilization, as of March 2025, we have fully utilized the IPO proceeds in compliant to objects objects defined 25:14 25 minutes, 14 seconds during the IPO. We are glad to report that IPO proceeds are fully utilized and the account stands closed. 25:20 25 minutes, 20 seconds In summary, FI26 performance. Okay, this brings to me towards the end of the finance presentation. Before we move to 25:27 25 minutes, 27 seconds Q&A, let me summarize the performance in four key points. Order books remained strong with four consecutive quarters of 25:35 25 minutes, 35 seconds growth in billto book ratio of greater than one. Revenue was impacted by FI25 large order completion but we are well 25:43 25 minutes, 43 seconds positioned for a strong FI27 backed by strong order book. Margin remains healthy at double digits with further 25:50 25 minutes, 50 seconds improvement possible with scale. Fourth, industry and product mix are diversified and moving in the right direction supporting the long long-term margin 25:59 25 minutes, 59 seconds expansion. With this, I'll send you to the close. Thank you for your kind attention and we can move to Q&A from participants. 26:08 26 minutes, 8 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press 26:15 26 minutes, 15 seconds star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are 26:24 26 minutes, 24 seconds requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question Q assembles. 26:35 26 minutes, 35 seconds We'll take our first question from the line of VBO Mishra from Film Investor. Please go ahead. 26:42 26 minutes, 42 seconds Uh hello sir. Uh good evening. 26:44 26 minutes, 44 seconds Congratulations for the very strong numbers uh in respect of margins and good very good cash flow and order book 26:51 26 minutes, 51 seconds and all. Uh but I think there is a small if you see the yi uh revenue I think in the quarter three call uh we were 26:59 26 minutes, 59 seconds confident of uh getting our re revenue yi as well. So uh what could be the reason I I think I mean US tariff or 27:08 27 minutes, 8 seconds west Asia war or any other reason for that? 27:12 27 minutes, 12 seconds Yeah. So yes, so I mean first of all thanks for that. It is a question which is very important for everyone. I think the challenge I mean the headwind what 27:19 27 minutes, 19 seconds we had is one is the west Asia war impact. So because of that the materials got delayed um because usually all the 27:26 27 minutes, 26 seconds all our materials comes through the uh European uh I mean West Asia uh in terms 27:33 27 minutes, 33 seconds of uh the fight the all the fights and all. So they got delayed and so we got a very late we got the materials for the 27:41 27 minutes, 41 seconds quarter to finish it and we also had um other headwinds in terms of u the Israelis uh where we are working some of 27:49 27 minutes, 49 seconds the mean some of the programs defense programs uh we could not get some of the approvals clearances because of the again because of the estia war which is 27:58 27 minutes, 58 seconds going on there and added to that and we also have some of the NPI approvals from our customers. So these are the three main reasons where we could not able to 28:07 28 minutes, 7 seconds meet our commitment what we said uh in the last u investor call. 28:13 28 minutes, 13 seconds All right sir and sir uh just uh to I mean know it is not in the presentation how much exposure we have uh in Asia in 28:21 28 minutes, 21 seconds terms of our supply chain or deliveries and uh going ahead we expected very strong FI27. So uh uh how is it going to 28:30 28 minutes, 30 seconds affect our targets or what are the targets that we have set in terms of revenue and margin for 27 28:37 28 minutes, 37 seconds FIA 27 I think the revenue I think we are not giving any of the guidance right now on the revenue side but we definitely I mean whatever FIA 26 has 28:45 28 minutes, 45 seconds gone by so that is a year which was a not a good year for us I think now FA27 you'll be starting seeing the growth uh 28:53 28 minutes, 53 seconds year-over-year growth you'll be seeing it in all the quarters four quarters which is a very strong I think by looking at the order backlog what we have um and also the pipeline which we 29:02 29 minutes, 2 seconds have currently so it is a um strong reason for us to look for higher growth 29:10 29 minutes, 10 seconds okay so I think I request you to join back the queue please as we are participants waiting for that 29:18 29 minutes, 18 seconds thank you so much next question is from the line of Samit sa from mquery please go ahead 29:26 29 minutes, 26 seconds yes uh thank Thank you very much. Uh I have a couple of questions. So uh you know obviously very strong audible book 29:32 29 minutes, 32 seconds growth that sounds uh uh promising um but it's not converting into revenue and I can understand the reasons you've 29:39 29 minutes, 39 seconds provided but can you pro give us some sense of how do you define order book and backlog 29:46 29 minutes, 46 seconds uh and has that definition stayed consistent uh uh over the last few quarters? 29:52 29 minutes, 52 seconds Yeah. So when we say order book so those are the purchase orders which we got from our customers okay only that we will take it where we can take material 30:00 30 minutes actions that's where we will consider as a order book we won't take anything which is uh a TCV uh and all those we 30:08 30 minutes, 8 seconds won't take it as a part of our order book order book is very clear it is a purchase orders which are available with us executable in that financial year or 30:15 30 minutes, 15 seconds beyond financial year so it is a total order book what we have but for the year FA27 order book is very very strong and 30:22 30 minutes, 22 seconds solid right now. Uh and um that's what I think in terms of order book order intake is I think as we said it is only 30:28 30 minutes, 28 seconds again the the again the POS what we get from our customers that only we'll take it as an order intake it is not anything 30:36 30 minutes, 36 seconds about uh uh this is an full TCV of five years so we'll get around $40 million so that we won't take as a part of our order intake. 30:46 30 minutes, 46 seconds Got it. Hope I made it clear. 30:49 30 minutes, 49 seconds Yeah. Yeah. Just one uh one question. Um I think in your slide deck that you had mentioned you're still looking for acquisitions 30:56 30 minutes, 56 seconds uh you know but IPO proceed that you've used up over 100%. any thoughts on uh what structure are you uh are you 31:03 31 minutes, 3 seconds thinking about as you look to make acquisitions? 31:08 31 minutes, 8 seconds uh uh RMS let me take that okay uh we continue to look for both organic inorganic growth and uh as as uh science 31:17 31 minutes, 17 seconds DNA which is you know we continue to look at opportunistic one we will look at both from a uh product perspective in terms of what we don't have and 31:25 31 minutes, 25 seconds geographically okay and in this is our in terms of the playbook of what we look for based on what comes in our market we 31:32 31 minutes, 32 seconds can evaluate it and depending on the fitment we will look at it okay we looked at sometimes in the last quarter but it did not go through but we 31:40 31 minutes, 40 seconds continue to look for opportunistically and as long as it fits in our portfolio in terms of growth geographically or product wise where we don't have that 31:48 31 minutes, 48 seconds expertise we will look for that okay so it depends on opportunities got it one final question um in terms of 31:55 31 minutes, 55 seconds you you identified some new new product areas you then spoke about semiconductors spoke about AI um you know seems like you're getting 32:04 32 minutes, 4 seconds into more sort of critical product uh segments. Uh can you spend a minute talking about what what products are are 32:12 32 minutes, 12 seconds you contemplating building there and uh give us a sense of you know when we should start to uh see the results of those uh new foray. 32:23 32 minutes, 23 seconds I mean on the particularly um on the equipment manufacturing for semiconductor equipment manufacturings. 32:30 32 minutes, 30 seconds So we are doing a lot of the power boxes uh for the customers and lot of those products which goes into the PCBs wire 32:37 32 minutes, 37 seconds harness and um the complete integration of those machinery the sub assemblies which goes into this that is that is where I think we are focusing today and 32:46 32 minutes, 46 seconds we are seeing a lot of uh traction from the existing customer and also from the new customers in semiconductor area okay so that's what that and again on the AI 32:55 32 minutes, 55 seconds side as I said we are expanding that's why I said we are now focusing more on those areas So, so probably we will uh 33:03 33 minutes, 3 seconds uh explore more on that and probably come back um in the next quarter if you have some update on that. Got it. Thank you. 33:12 33 minutes, 12 seconds Thank you. We'll take our next question from the line of Disha from Sappire Capital. Please go ahead. 33:19 33 minutes, 19 seconds Hello. Am I able? Yes. Please go ahead. 33:24 33 minutes, 24 seconds Yes. Yes. Thank you so much for the opportunity. So, so you mentioned that some of our revenue was impacted due to the West Asia. What will it be possible 33:31 33 minutes, 31 seconds for you to quantify the amount that was the amount that was there for and I believe that's the reason our inventory has gone up because the shipment didn't go through. 33:41 33 minutes, 41 seconds Yes, exactly. So that's so we have already planned for that. That's that's what the revenue which we have missed there and um that's where I think the 33:48 33 minutes, 48 seconds inventory which has gone up the DAO and the absolute values of inventory has gone up that is one of reason because of West Asia. Yes. 33:57 33 minutes, 57 seconds So can you quantify the amount of revenue that we lost out due to this? Will it be possible? 34:02 34 minutes, 2 seconds No, I think yeah I think as I said there are basically three uh areas where we have just impact uh impacted our Q4 34:10 34 minutes, 10 seconds revenues. So I think we we don't have uh I mean yes we have the numbers probably I think um uh we 34:20 34 minutes, 20 seconds mean it is uh maybe I I can get in here you know we don't want to get into exact quantification of the stuff but if you if you look at it some of them are 34:28 34 minutes, 28 seconds postponed in terms of pushing to the next quarter etc but what we can broadly say these are the reasons why there's been a gap between in terms of what we 34:37 34 minutes, 37 seconds expected and what happened but overall the way we ending this quarter is based on the audible work and what we uh have on hand gives us the confidence that you 34:45 34 minutes, 45 seconds know we should continue to grow quarter and quarter. 34:48 34 minutes, 48 seconds Is there any color on the order pipeline that we have and what sort of inflows will we expect for F27? 34:55 34 minutes, 55 seconds I mean so we are looking at um the order book I mean the book to build ratio is greater than one as as we said I think 35:02 35 minutes, 2 seconds we'll be focusing on that. I think we are very very confident by looking at the current order pipeline what we have. 35:09 35 minutes, 9 seconds So we will be uh working towards that and probably you'll be seeing those uh uh order intakes uh for every quarter um 35:18 35 minutes, 18 seconds you'll be seeing a positive things going forward. Okay. Um yeah so that's what I think probably we I can I can feel an order intake side here 35:27 35 minutes, 27 seconds just to maybe one point add to what the agenda said is you know from an order intake it's broadly the direction of what we want from a sectoral perspective 35:34 35 minutes, 34 seconds the the the non segment is growing and that's the direction we want to go on and there are some focus new areas of what Rajendra talked about India has a 35:43 35 minutes, 43 seconds sprinkling of that as well so overall from directionally we're happy with the way the audit uh book is shaping up and that gives the confidence for going forward. 35:53 35 minutes, 53 seconds Okay. All right. All right. And so what was the contribution from the BTS segment this quarter? 36:01 36 minutes, 1 second We're not getting into the specifics of section wise thing. I I think uh B2S is a long-term play. Uh last year we did not have this is the first year we are 36:08 36 minutes, 8 seconds having it. Uh for the first year it has done well and this will in terms of certification to serious order and volume production. It will have a couple 36:17 36 minutes, 17 seconds of years down the line is aware it will come up. But overall we are very happy with the way the performance has come up. It's better than our expectations 36:24 36 minutes, 24 seconds but uh we should give that division a little more time in terms of what we do but otherwise it continues to be a profitable division 36:32 36 minutes, 32 seconds and we so this margins of 10 to 11% we sort of expect that to sustain right going ahead. 36:38 36 minutes, 38 seconds Yeah, basically on the margin front, let me try and answer a bit of it. If you look at it, our our revenues could have been softer, but we've been able to consistently maintain the margin. It's 36:47 36 minutes, 47 seconds because based on the quality of the revenue on the audience remains strong and and we we are happy 36:55 36 minutes, 55 seconds about it. We can say that we we are confident of sustaining it and if we have the top up in terms of the growth, the operating leverage impact will start 37:03 37 minutes, 3 seconds kicking in and we can have something on top of this bit. Okay. So that's what we are confident about in terms of sustaining and performing better as the 37:13 37 minutes, 13 seconds volume grows and so given the strong order book that we have like can we expect some some 37:20 37 minutes, 20 seconds more like 25 to 50% sort of growth for FI27 would that be a fair assumption um on revenue guidance we clear that we 37:29 37 minutes, 29 seconds will not be giving any guidance on that but having said that part what I can say is you know Q4 was a good quarter in terms of the growth Q1 Q and also The 37:37 37 minutes, 37 seconds order book and the visibility what we have gives us the confidence it will be going to be a strong year which will make probably everybody happy but I don't want to be getting into the numbers and let's leave it at that. 37:48 37 minutes, 48 seconds Okay. All right. Thank you. Thank you. 37:52 37 minutes, 52 seconds Next question is from the line of Adital from MSA Capital Partners. Please go ahead. Hello. I'm audible. 37:59 37 minutes, 59 seconds Uh can I use your handset mode please? Yes sure. Is it better now? A little better. Please go ahead. 38:08 38 minutes, 8 seconds Yeah. Uh thank you so much for the opportunity. Uh great performance on the margin front. So I had uh two questions 38:15 38 minutes, 15 seconds on uh Altech and then on our the investments that we made on uh our sales 38:22 38 minutes, 22 seconds team. So let me start with Altech. So uh Altech historically operates on a much shorter uh book and ship cycle compared 38:32 38 minutes, 32 seconds to the 18 24 month gestation that we usually see in our uh standalone base. 38:38 38 minutes, 38 seconds So how do you see u this impacting our projected uh 27 uh consolidated revenue 38:46 38 minutes, 46 seconds because there are there there's enough and more crosseller synergies. So just if you can if you can highlight between 38:54 38 minutes, 54 seconds the growth that we are seeing uh in standalone visa v altech yeah I mean so alche I'll take I think 39:01 39 minutes, 1 second as you rightly said uh um we see we usually get it order and take in the same year most of the things getting 39:08 39 minutes, 8 seconds converted uh in that year almost 50% I can say get converted I think we are seeing a good I mean we also have a good 39:16 39 minutes, 16 seconds order backlog right now available and we also see a lot of pipeline from the existing customers and also to add to 39:23 39 minutes, 23 seconds you I think we also added um uh one of the new customer the synergy customer from the sign DM standalone side now 39:31 39 minutes, 31 seconds they also just started working with Altech we got the first PO there uh in the last quarter and we'll be seeing 39:38 39 minutes, 38 seconds we'll be seeing more of those tractions happening from the synergy coming in and uh with the order with the order book which we have plus the pipeline which we 39:47 39 minutes, 47 seconds have we are very confident that um we'll be seeing the growth within taltech business in FA22. 39:56 39 minutes, 56 seconds Understood. So, so the growth rate is not uh the growth rate that we seeing in our in our in our order book is not 40:03 40 minutes, 3 seconds explicitly reliant on specific cross energies. If it happens, it's an it's an addition. Correct. Correct. Correct. Correct. Exactly. 40:12 40 minutes, 12 seconds Yeah. and uh on the invest uh the the point that you highlighted in your introduction that we've investment we've 40:20 40 minutes, 20 seconds invested in our sales team. So when I look at uh the standalone IITA margins visav the uh difference between the 40:29 40 minutes, 29 seconds console and standalone the margins IITA margins has gone down it has in in Q4 specifically this is purely because of 40:37 40 minutes, 37 seconds our investments that we made in Altech in employee benefit in employee expenses correct? 40:45 40 minutes, 45 seconds Yeah, let let me answer this question. 40:47 40 minutes, 47 seconds In terms of the the uh average margin between the India and US business, US business is going to be lower and that's 40:54 40 minutes, 54 seconds something which is expected because US manufacturing will have a lower AITA margin. So this is in terms of the expected lines. That's point number one. 41:02 41 minutes, 2 seconds Point number two, overall Altech and and and the growth in Altech continues to have a bit of a overhang with respect to 41:10 41 minutes, 10 seconds the the tariff overhang still continues to be there. you know there's no clarity in terms of how which direction it's going which I think we are all aware of 41:18 41 minutes, 18 seconds okay overall the synergy benefits in the crosspollination there's a little bit of a uh slowness in it hopefully things should settle down and then it will lead 41:27 41 minutes, 27 seconds to it and and more once we have a crosspollination where Indian customers start going through Altech and the US customers start going to India we will 41:35 41 minutes, 35 seconds see those benefits those benefits are just started you know on a on a trial basis happening but not in a full-fledged But when that happens we 41:44 41 minutes, 44 seconds will have a uh uptick in the margin but as of now none of them is factored in and as you rightly said the the margins 41:52 41 minutes, 52 seconds are lower but that's that's the expected the more we start moving to India and using altech as the beach in terms of US business is where the uptick will come 42:00 42 minutes in but that will take some time and it also dependent clearly on the tariff overhang getting cleared which should happen over the period of time. 42:09 42 minutes, 9 seconds Understood. Understood. Just let me squeeze in one more question. So uh the questions one is on the the current 42:18 42 minutes, 18 seconds investment that we've made in employee how much uh in the sales team how much sales can they generate and then what is the revenue potential of this sales team 42:27 42 minutes, 27 seconds and then also if you can if you can just uh help us understand uh the build to specification right because uh last 42:36 42 minutes, 36 seconds couple of quarters back you had said that mass manufacturing orders at least for the new for the four new uh anchor 42:44 42 minutes, 44 seconds clients that we had onboarded will start coming in from uh FI27, Q3 or Q4 and we we would see this we would see actually 42:53 42 minutes, 53 seconds scaling up in FI28. Is this still on or do you see this happening later uh earlier than expected? If you can just comment on that. 43:02 43 minutes, 2 seconds No, I think as you rightly said that's what uh is going to happen. We'll be seeing it some uh uptick in the order intake um because of this new people who 43:11 43 minutes, 11 seconds are on board and we're also adding few more people uh which where we are in the where we are in the process right now 43:18 43 minutes, 18 seconds and with all that we'll definitely seeing um more order intake in uh Q3 and Q4 and beyond. So yes from these all these new people coming in. 43:28 43 minutes, 28 seconds Understood. So and also in the build to specification that you had mentioned last quarter that uh we onboarded phonio 43:35 43 minutes, 35 seconds clients uh in the in the in the defense vertical. Exactly. Exactly. Yeah. Yeah. Yeah. 43:41 43 minutes, 41 seconds You'll be seeing the Yeah. You you will also seeing the BTS uh the revenues and also in the order intakes for the next year. Yes. 43:48 43 minutes, 48 seconds So the inflection point will be uh flag end of FI27 or more to or we'll see see the visibility more coming in FI28. 43:57 43 minutes, 57 seconds No, it will be on the flag end of FA27 and and also in FA28 board. Yes. 44:03 44 minutes, 3 seconds Perfect. Perfect. No, this clears a lot of things. Thank you so much and wishing you wishing you and the team all the very best. Thank you. Thank you. 44:11 44 minutes, 11 seconds Thank you ladies and gentlemen. In order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at 44:19 44 minutes, 19 seconds a time. You may join back the queue for follow-up questions. We also request participants to keep their questions please. Thank you. 44:28 44 minutes, 28 seconds Next question is from the line of Hersh Shade from PI Square. 44:34 44 minutes, 34 seconds Hi sir, good evening. Um I just want to understand a bit more about the dip in margins that we saw this quarter. Um I think you answered it previous but I 44:43 44 minutes, 43 seconds just wanted to get to know more a bit because uh we moved out of the aerospace uh sorry of the of the defense orders which should give us higher margins but 44:52 44 minutes, 52 seconds we saw dip there J. So could you explain a bit more? 44:56 44 minutes, 56 seconds Yeah. Uh from a margin perspective what uh I think as you reported we continue to sustain the double digit margin which 45:02 45 minutes, 2 seconds is our our focus on okay and in in terms of the uh absolute numbers. Okay. 45:09 45 minutes, 9 seconds Obviously there's been a drop in terms of the uh margins. Okay. Hopefully moving forward as we move along and if if the product remains the same. Okay. 45:19 45 minutes, 19 seconds These margins are sustainable in terms of what we're doing. 45:24 45 minutes, 24 seconds So um like could you just go more into the reason for the dip there in the in the margin uh in the margins 45:32 45 minutes, 32 seconds the margins in terms of overall if you look at it it's actually improved okay no I'm talking about this this quarter 45:39 45 minutes, 39 seconds to be to be specific we saw a dip yeah that's more reflected on the revenue uh drop and the operating 45:48 45 minutes, 48 seconds delever impact because the fixed cost continues to remain the same that's that's the impact of it. Okay. 45:54 45 minutes, 54 seconds So, but shouldn't we have seen better margins from from not picking up um the orders from the from the defense space? 46:04 46 minutes, 4 seconds Wasn't that the reason that we moved out uh out of that space in the first place? 46:10 46 minutes, 10 seconds That's what I said at the percentage at absolute level it has come down and percentage level it's it's uh improved or maintained and that's what uh I 46:17 46 minutes, 17 seconds explained which is because of the revenue deg growth and operating delever impact. Okay. Got it. 46:26 46 minutes, 26 seconds Thank you. 46:28 46 minutes, 28 seconds Next question is from the line of Shashank Ja from SB Capital. Please go ahead. 46:35 46 minutes, 35 seconds Hello. 46:37 46 minutes, 37 seconds Yes Shashank. Please go ahead with your question. 46:40 46 minutes, 40 seconds Yes sir. I have one question which is regarding the order book. So when you say bill to build book to build order of 46:46 46 minutes, 46 seconds 1.5 then the order book contains like 400 crB. So it mean that we can uh do 1,600 cr plus of f7. 46:57 46 minutes, 57 seconds So can you confirm on that? 47:00 47 minutes No, no, I think see order book whatever is there in that is executable order book in this financial year and then I think as we as said earlier the order 47:07 47 minutes, 7 seconds book whatever we have is maybe 18 months to 22 months 24 months range right so not that everything can be happening in 47:14 47 minutes, 14 seconds only in one financial year so can you give some number like I'm asking for some numbers 47:22 47 minutes, 22 seconds that's what I said we not we not giving any guidance right now on that uh in terms of how much of the order intake will be converted as a 47:30 47 minutes, 30 seconds revenue in FI27. So we are not giving that guidance but probably you'll be seeing that in in the next quarters itself starting from next quarter itself we'll be seeing that growth. 47:41 47 minutes, 41 seconds Okay. And second thing is that like order book pipeline when you say so can you give me what how big is the pipeline some number conservative also we find 47:49 47 minutes, 49 seconds sir I mean the uh are you talking about sales pipeline what we have? 47:56 47 minutes, 56 seconds Yeah yeah m uh order book pipeline that we are negotiating right now are we expecting for next one year? I think we 48:03 48 minutes, 3 seconds have a I mean uh very good order order pipeline right now as I said it is a uh closer to half a billion uh dollar order 48:12 48 minutes, 12 seconds pipeline which we have today uh the sales pipeline where the teams are working out to make those things as an order intake. So that's where uh I think 48:20 48 minutes, 20 seconds the focus is going to be in the FI27 order intake targets which we are driving it internally. 48:28 48 minutes, 28 seconds Thank you. And last thing on the Shashank, I request you to join back the queue please as we are participants waiting for their turn. Thank you. 48:36 48 minutes, 36 seconds Next question is from the line of Vipra Shivas Sava from Philip Capital. Please go ahead. Uh yeah. Hi sir. Good evening sir. 48:45 48 minutes, 45 seconds Quickly one line item on the balance sheet which is contract assets. Uh can you please explain what is that? 48:53 48 minutes, 53 seconds Uh contract assets is the unbuild revenue which we have. Okay, that's more from the B2s uh thing. Yeah. 49:01 49 minutes, 1 second Okay. Uh fair enough sir. And so from a working capital perspective, what kind of targets you have for XJ? Do we see 49:09 49 minutes, 9 seconds further improvement from here on or you expect to maintain the current level? 49:14 49 minutes, 14 seconds Yeah. Uh on on networking capital which we talked about is you know um slightly elevated. So we definitely see possibilities for improvement and we're going to continue to work on it. Okay. 49:24 49 minutes, 24 seconds uh our target is to uh reach about 100 120 in terms of the number of days but we have some distance to go maintaining 49:32 49 minutes, 32 seconds uh what do you call a profitable uh efficient operations and growing is always a challenge but we continue to do it and we continue to work on improving 49:40 49 minutes, 40 seconds it okay it'll take couple of years but that's a work in progress I think the last question from my end 49:46 49 minutes, 46 seconds from an aerospace perspective uh that the company is mainly European defense company as a client 49:54 49 minutes, 54 seconds Are we targeting new geographies or are we continue to be limited to Europe and Middle Can you repeat the question please? 50:03 50 minutes, 3 seconds Ver can you use your handset mode please? 50:07 50 minutes, 7 seconds I wanted to know so from an aerospace perspective can uh we currently have clients in Middle East and Europe you 50:14 50 minutes, 14 seconds know is mainly Rafael and TH and all these companies. Do we have plans to switch to other clients also or we plan 50:21 50 minutes, 21 seconds to increase our wallet share with these clients? No, that's what I think earlier also was mentioning that um uh we'll be also 50:28 50 minutes, 28 seconds focusing more on the non a side of the business. So which we'll be seeing that uh I think if you look at some of the order pipeline what we what we have so 50:37 50 minutes, 37 seconds that's where I think it gives a strong uh this thing to us saying that yes we'll be seeing more of the non A&D along with the A&D growth whatever we 50:45 50 minutes, 45 seconds have the pipeline will be continuing but yes not that not that because of whatever is happening today in the west Asia or in other areas but uh we see a 50:54 50 minutes, 54 seconds traction definitely in the nana and we'll continue that along with the a growth Right. So thank you. 51:02 51 minutes, 2 seconds Thank you. Next question is from the line of Ryme Agraal from 3P Investment Manager. Please go ahead. 51:12 51 minutes, 12 seconds Hey. Hi. Can I use your handset mode please? Yeah. Is it better? Yes, please go ahead. 51:20 51 minutes, 20 seconds Yeah. So uh I wanted to ask uh two questions. One was on the uh directions 51:27 51 minutes, 27 seconds on margin in the future years. Uh and on the areas of growth where do we see growth coming from uh in terms of 51:37 51 minutes, 37 seconds revenue and order book and particularly uh uh uh we have had some days in the quarter uh po like 51:45 51 minutes, 45 seconds during the war season are we seeing any positive commentary from the uh Israel defense customers? 51:53 51 minutes, 53 seconds I'll u take the questions on the margins. Okay. So um in in terms of the margins uh we are confident of sustaining the margins moving forward. 52:02 52 minutes, 2 seconds This is based on the order book in terms of customs of what we have. Okay. With the with the current mix we can uh 52:09 52 minutes, 9 seconds continue to maintain and with the growing volumes there will be a uh a couple of basis points improvements with respect to the operating leverage impact 52:17 52 minutes, 17 seconds which is on the positive side. Okay that's what we will continue to aim for in the next year. uh in terms of the business growth. 52:25 52 minutes, 25 seconds Yeah, I mean as I said I think as I mean if you if I can answer your last point uh in terms of the defense side or Israeli business side um I think we'll 52:33 52 minutes, 33 seconds be seeing a lot of the traction there which we are seeing it right now. there are a lot of um RFQS in the pipeline which we are working out currently and 52:42 52 minutes, 42 seconds we'll be seeing a more of the um order pipeline and the order intake coming from the Israeli customers and we see 52:50 52 minutes, 50 seconds the growth not only from that one area I think even from existing customers uh both in aerospace non-erospace and also the new verticals the electric vehicles 52:59 52 minutes, 59 seconds where we are focusing we are seeing a lot of traction in that one so we'll be seeing more of the revenues growth coming from those areas That's it. Thank you. 53:10 53 minutes, 10 seconds Thank you. Our next question is from the line of Deepak from Unifi Capital. Please go ahead. Hello. 53:18 53 minutes, 18 seconds Uh thanks for the opportunity. So firstly, if you can cover the geopolitical aspect uh see us is a big 53:25 53 minutes, 25 seconds portion of our revenues. So with the reduced tariffs, have we seen any pick like we any pick up in the demand and 53:32 53 minutes, 32 seconds order uh order book? That is one and also uh the West Asia crisis how much I 53:40 53 minutes, 40 seconds didn't I didn't understand how much proportion of a revenues is coming from the Israeli client and u I'm assuming he 53:48 53 minutes, 48 seconds would have not given you the delivery timeline yet because nobody knows when the war ends but on the freight aspect 53:56 53 minutes, 56 seconds uh are you able to reroute from other uh other lines or other modes of transport 54:02 54 minutes, 2 seconds that you're getting the supplies for uh your raw material that you that you elaborated. So on these two fronts I wanted your clarity. 54:14 54 minutes, 14 seconds Okay. So yeah sure definitely JP on the tariff side yes there is slightly I mean I mean yeah there was some disclarity 54:23 54 minutes, 23 seconds but still the cloud has not gone away correct I think so we mean we still don't know uh but the customers are 54:29 54 minutes, 29 seconds still waiting we are seeing some uh opportunities coming right now asking us for submission of the quotes but it was 54:37 54 minutes, 37 seconds not that what we were having in the past but I think probably it will just clear that uh cloud in the probably the just 54:44 54 minutes, 44 seconds one quarter or so once we get a I mean full clarity from the US tariffs. Okay. 54:50 54 minutes, 50 seconds Uh but otherwise yes but to your question yes we are seeing the new opportunities coming in right now. 54:57 54 minutes, 57 seconds And the second one on the west Asia it is not that it is only from one region there where we are where we could not able to make the revenue. 55:06 55 minutes, 6 seconds Sorry it is uh mainly the supply chain where we are getting it um through the a cargo. I think all that cargo comes um 55:15 55 minutes, 15 seconds either from Dubai or this thing uh DHA. So that's where I think we had a lot of challenges in getting the 55:23 55 minutes, 23 seconds materials. It is not that our final goods are only for the customers there um in the UAE region or so okay it is 55:32 55 minutes, 32 seconds not for that it is basically for all the customers where we have got impacted because of not getting the materials on time. 55:43 55 minutes, 43 seconds Yes. And uh on this aspect are you able to uh fix this issue? Has there been any solution to it that you found uh which 55:50 55 minutes, 50 seconds gives you a good visibility going forward? And uh this and yeah you can answer this then I have another question. 55:59 55 minutes, 59 seconds Yeah I think see we are taking an actions wherever wherever we see the impact now. So I think that's where I think our inventory also has gone up because of the materials uh where we 56:08 56 minutes, 8 seconds have some partial materials and we are working out to ensure that we get the materials and also as Krishna said there are also some challenges in terms of the 56:16 56 minutes, 16 seconds lead times gone up for the memories correct so those are the things where we had some impact of the inventories and 56:23 56 minutes, 23 seconds we are uh so now if you ask me about some of the actions we have already ordered the materials for a long uh for 56:30 56 minutes, 30 seconds the entire FA27 particularly for the critical item items where there are long lead items we already placed the orders so we are ensuring that so that way at 56:38 56 minutes, 38 seconds least it will ensure us that we will meet our commitments for FA27 okay thank you so one more question 56:46 56 minutes, 46 seconds I request you to join back the queue please as we have participants waiting for the term thank you next question is from the line of Praid 56:55 56 minutes, 55 seconds Sahai from PL Capital please go ahead yeah thank you for opportunity uh sir my question related to the order book uh is 57:04 57 minutes, 4 seconds first one is uh is there any order from the associate companies of a client you have and how is the mix of a geography 57:12 57 minutes, 12 seconds in your order book because uh uh you know highlighting the RM delay or the Israel defense orders these which has 57:21 57 minutes, 21 seconds impacted your revenue. So is these orders also uh in the near terms expected to uh get a delay in exclusion? 57:32 57 minutes, 32 seconds So according to your uh this initial first question so we don't have any inter company uh orders okay it is all 57:40 57 minutes, 40 seconds from the customer orders whatever we have today with us all order books are from from our uh our customers not from 57:48 57 minutes, 48 seconds any inter company okay and um second thing is yes I think in terms of uh um 57:55 57 minutes, 55 seconds sorry you said about the second question second question sorry what is the other second RM RM delay RM delay which has 58:03 58 minutes, 3 seconds impacted your revenue and the second the Israel defense orders. So you have a order book such kind of a order books we 58:11 58 minutes, 11 seconds you have already. So in the near terms we may see uh execution challenges of your order book because of these. 58:18 58 minutes, 18 seconds Yes. Yes. There will be now today what happened whatever something whatever revenue we missed in the Q4 now that just moved into the Q1 some of some of 58:27 58 minutes, 27 seconds the revenue has come to the Q1 correct where you'll be working. So that way you'll be seeing some of the right shift and probably once uh the issues get 58:34 58 minutes, 34 seconds settled down probably I think everything will come uh uh online yeah on track and uh last question on the margin 58:43 58 minutes, 43 seconds that's gross margin so your gross margin if I look at on the sequential basis there is a contraction and that's uh 58:50 58 minutes, 50 seconds definitely because of the memory or the RM electronics availability and all so how you are seeing this cross margin 58:58 58 minutes, 58 seconds movement in the coming quarter or even 27 uh considering such kind of a challenges to continue. 59:06 59 minutes, 6 seconds So let me take this question. Gross margin uh you know it's not seen a huge moment a couple of basis point movement has happened. This is a reflection of 59:15 59 minutes, 15 seconds product mix in terms of what we manufacture quarter on quarter. It's not going to be uniform right through. 59:20 59 minutes, 20 seconds That's point number one. And point number two there are also near-term factors of what the supply chain and the disruption and few things like that. So 59:28 59 minutes, 28 seconds it's a combination of both. Hopefully the our our target in the long run is to maintain the the a bit at the double digit level and in terms of what we're 59:36 59 minutes, 36 seconds doing. Okay, that's what we do. There will be a bit of volatility between all of this for the reasons I said but hopefully we'll able to we have been 59:43 59 minutes, 43 seconds able to manage and sustain the margin and that's what we will aim for to do in the long run. 59:50 59 minutes, 50 seconds Thank you sir and all the best. Yeah, thank you. 59:54 59 minutes, 54 seconds Next question is from the line of Kiran from table tree capital. Please go ahead. Thank you so much for the opportunity. 1:00:03 1 hour, 3 seconds Uh so a two-part question. One uh uh other expenses have significantly gone this year even this quarter despite the 1:00:12 1 hour, 12 seconds year on year uh despite the significant drop in revenue or other expenses have gone from 29 cr to 44 cr uh Q3 was the 1:00:21 1 hour, 21 seconds same. So uh and this is obviously uh disturbing our beta margin quite significantly. So what accounts for 1:00:29 1 hour, 29 seconds these other expense increases despite severe degrowth in revenue? 1:00:36 1 hour, 36 seconds Yeah, the the in terms of other expenses what we are seeing is is a mix of both uh US and India operations all put 1:00:44 1 hour, 44 seconds together what you're seeing that uh effect and and moving forward you know uh once we see the revenue growth okay these other expenses in terms of you 1:00:53 1 hour, 53 seconds know uh will have the operating leverage effect of you know it's going to be broadly fixed so that's how and and we'll keep a tab on in terms of what we 1:01:01 1 hour, 1 minute, 1 second do with that sorry sir it's not clear at all. I mean your voice was clear but your answer is not clear. 1:01:10 1 hour, 1 minute, 10 seconds What I'm saying is it's the other expense is a mix of both the India and US operations put together. Okay. And uh 1:01:18 1 hour, 1 minute, 18 seconds there are as we move forward and when the volume picks up this item specifically will have in terms of the fixed in nature. So you will have the 1:01:26 1 hour, 1 minute, 26 seconds operating leverage impact but what you're seeing is the the volume as a percentage has gone up. Okay. Hopefully as we move forward this will be under control. 1:01:36 1 hour, 1 minute, 36 seconds Got it. Got it. Second question is uh in Q3 uh I guess Krishna did speak about 25% year-on-year growth 1:01:46 1 hour, 1 minute, 46 seconds next year in 27. So if I just do rough numbers again I'm not looking for exact numbers. Uh we'll end up at around 1600 1:01:53 1 hour, 1 minute, 53 seconds cr revenue next year. If you do a 25% growth roughly uh for and our remaining order book will be 800 and year on year 1:02:02 1 hour, 2 minutes, 2 seconds we'll add like quote unquote to 500. the 2000. So are we really I mean despite all of the competition increasing their 1:02:10 1 hour, 2 minutes, 10 seconds order books at 40% and similar spaces right defense, aerospace, industrial, medical uh quite a few competitors are 1:02:18 1 hour, 2 minutes, 18 seconds there. There seems to be some structural uh is there a structural issue why we are not able to grow? Altech acquisition 1:02:25 1 hour, 2 minutes, 25 seconds didn't go according to plan when I say because you reverse the earnouts right so that tells that it will not act according to expectations. We're not 1:02:33 1 hour, 2 minutes, 33 seconds growing our order books by 35 40% like rest of the companies who cater to industrial medical aerospace and 1:02:40 1 hour, 2 minutes, 40 seconds defense. I'm not even considering consumer right. Is there anything structural that we are seeing uh a problem uh within the organization or is 1:02:50 1 hour, 2 minutes, 50 seconds there some industry issue or is it a veteratia exposure issue just not clear around the strategy of what we are 1:02:57 1 hour, 2 minutes, 57 seconds saying. I mean the similar numbers every double digit margin all that is taken but there seem to be something missing 1:03:04 1 hour, 3 minutes, 4 seconds in the entire big which we as investors are not able to understand. 1:03:09 1 hour, 3 minutes, 9 seconds I think so it is a very good question from your side. So I really appreciate that. See I think if you so if you can look at it um the investments what we 1:03:17 1 hour, 3 minutes, 17 seconds have just made in in terms of the uh our team sales teams. So we just started as we have few people on board as I said we 1:03:24 1 hour, 3 minutes, 24 seconds are still getting some more people in this quarter. Um so I think those are the things which probably gives us um a good uh order intake and also the new 1:03:32 1 hour, 3 minutes, 32 seconds pipelines coming up to us. So there is no structural challenges anything in the organization um because we are running 1:03:39 1 hour, 3 minutes, 39 seconds the business since last I mean several years. So we have not seen any of those challenges. So it is predominantly um 1:03:46 1 hour, 3 minutes, 46 seconds having the right people there on the ground I mean so that we can get the new orders and go to the new customers and 1:03:53 1 hour, 3 minutes, 53 seconds acquire them. So I think as you said about the growth percentages I think we'll be within the ballpark range for 1:04:00 1 hour, 4 minutes the next finance year for the FI27 and we are very we are very confident on that one. 1:04:09 1 hour, 4 minutes, 9 seconds Thank you. Yeah, I think just to just to add to what Rajendra said, I think you know we we did have a challenge in order intake in FI25 and that's why we had to 1:04:18 1 hour, 4 minutes, 18 seconds make some changes uh in the organization that has translated to the order increase in FI26. If you look at our 1:04:26 1 hour, 4 minutes, 26 seconds order intake increase, I mean you mentioned competition at 3540%, we are also at this at that percentage between FI25 and 26. So yeah, I mean 1:04:35 1 hour, 4 minutes, 35 seconds extrapolating that yes, we did have a problem in 25 in order intake which translated to obviously the revenue that you're seeing in 26, but the fact that 1:04:44 1 hour, 4 minutes, 44 seconds we are at competition or even I would argue higher than competition in 26 should translate or will translate sorry into a very strong FI27. 1:04:55 1 hour, 4 minutes, 55 seconds Thank you ladies and gentlemen. We'll take that as the last question for today. I now hand the conference over to Mr. Krishna Bodhanapu for closing comments. over to you sir. 1:05:05 1 hour, 5 minutes, 5 seconds Thank you very much and thanks everybody for joining uh today for this uh con for this uh investor call. Um obviously we've talked about a lot but I'll just 1:05:13 1 hour, 5 minutes, 13 seconds say thank you for the very insightful questions and thank you for also giving us some food for thought on on where we should be looking at and what we should 1:05:20 1 hour, 5 minutes, 20 seconds consider. Like I said um it was a good start to the year given that we're coming off a very very strong order book. So I'm confident that we will have 1:05:28 1 hour, 5 minutes, 28 seconds a strong FI27. Thank you for your support and we'll again speak next quarter. Thank you. Thank you on behalf of Scan DLM Limited. 1:05:37 1 hour, 5 minutes, 37 seconds That concludes this conference. Thank you for joining us and you may now disconnect your lines.