Azad Engineering Limited (AZAD) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Azad Engineering Limited Q3-F526 Earnings Conference Call. As a reminder, all participant lines will be in the lesson only more, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and it may involve risk and uncertainties that are difficult to predict. I now hand the conference over to Mr. Rakesh Chobdar, Chief Executive Officer and Chairman. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us for the Q3 and 9-month FI26 earnings call. I'm Rakesh Chobdar, Chairman and CEO of Azar Engineering Iptad. On the call with me today are Mr. Mishu Walpani, full-time director, and Mr. Ronan Jaju, our CFO. The results and investor presentations have been uploaded on the Stock Exchange and the company website. I hope everyone has had the opportunity to review them. Let me begin by saying that this quarter reflects discipline execution across all fronts. Revenue growth margin, stability, new customer onboarding, contract expansion, and steady progress on our capacity creation roadmap. Let me talk about the performance overview. For Q3FI26, we reported revenue of 155.8 crores, registering growth of over 31% year-on-year. EBITDA for the quarter stood at 60.1 crores. Registring growth of over 40.7% year-on-year. Profit after tax was 34 crores, registering growth of over 41% year-on-year. Despite expansion-related costs and ongoing ramp activities, margin remains strong and stable. This reflects operating discipline, productivity strength, and execution consistency. For nine-month FY26, revenue has grown nearly 32% year-on-year. EBITDA and PAT have shown significant growth over last year. Importantly, our ninth-month profitability has already exceeded the full year of FY25 level. This demonstrates the structural strength of our business model. Our focus continues to remain on profit growth. We are not changing scale at the cost of margins. Every growth initiative is aligned with long-term sustainability and value creation. Order book and customer engagement? Our order book remains strong at over 6,500 crores plus, providing multi-year revenue visibility. Since this thing, we have consistently grown our order book quarter after quarter. This reflects increasing trust from global OEMs and the expansion of wallet share across both new and existing customers. A key highlight this quarter is our engagement in contract progression with Safran and Pratt & Whitney for highly engineered critical rotating aerospace components. These partnerships are built over years of engineering validation, qualification, and performance consistency. They represent high entry barriers and deep integration, stickiness into customer programs. Energy and oil and gas continue to contribute to the majority of revenues. At the same time, aerospace and defense is steadily increasing. It share and will play an increasingly important role over the medium term in creating a well-diversified business mix. On the capacity expansion, As we have stated in previous calls, F526 is a year of stabilization. The new plants dedicated to GE, Mitsubishi, Siemens programs have been capitalized. Each plant is currently at a different stage and under stabilization, qualification of both facility and products, while scheduling the customer demand. It is important to understand that stabilization in our industry is not immediate. Aerospace and energy components require stringent validation, certification, and customer audits before full capacity utilization is achieved. We expect stable orbiting levels by FY27 and maximum utilization starts by FY28. The capacity we are creating is substantial. These are not incremental expansions. We are building multifold scalable infrastructure designed to support long-term growth visibility already secured through firm contracts. Managing simultaneous constructions, equipment commissioning, workforce training, certifications, and deliveries is complex. However, Our team has executed this phase with discipline and focus. On the growth outlook, based on plant readiness, secure order book, and customer demand visibility, we remain confident of achieving 25% plus revenue growth over the coming years. FY26 remains a transition year where stabilization efforts continue. The larger operating leverage benefits will be more visible from FY27 onwards as capacity utilization improves. We are building capacity against firm contracts and long-cycle programs. There is no speculative expansion. With that, I will now invite Mr. Mishnuwagwani to provide operational insights. Thank you.

Thank you, Chairman, for an insightful discussion on the quarter results. Now, I'm Vishnu Malpani, whole-time director of Hazard Engineering. I will take you through some additional information of our operational performance this quarter. From an operational perspective, Q3 and the nine-month period have been about disciplined execution, like Chairman mentioned, and structured ramp-up. This also, this quarter also represents our highest ever quarterly and nine-monthly performance. We've delivered revenue growth across all our business segments. During this quarter, our operational efforts have been focused on standarding execution and discipline across the organization. We have continued to embed lean principles into our newly built facilities. These manufacturing facilities that have been designed I've been designed with absolute precision around workflow-based layouts, monitoring systems, and world-class infrastructure. As our volumes build and operating leverage comes in, we will improve through natural fixed-cost absorption and cycle-time optimization. At the same time, we are also strengthening our supply chain reliability. We are seeking customer approvals and progressively improving our domestic sourcing to improve agility and reduce our lead times, also helping us manage our working capital better. However, all such initiatives remain fully aligned with OEM qualification requirements, traceability, compliance, and quality integrity remain non-negotiable. Equally important has been for us to build. Capability. Scaling infrastructure without scaling human resource for people is unsustainable. We've added in this financial year, skilled engineers, machinists, quality professionals across the organizations, across levels, and training still remains an important part of our entire employee journey. Aerospace and energy manufacturing demand repeatability, documentation discipline, and audit readiness. Operational capability is therefore a structural investment and not a tactical one. From an operational standpoint, FI26 remains a year of calibrated ramp-up. Stabilization will continue through the year, and by FI27, we expect these facilities to start operating at stable levels, enabling stronger operating leverage. Our approach remains measured with scaling against firm contracts. Long-term revenue visibility. We are maintaining quality leadership and ensuring that our growth is both disciplined and sustainable. With this, I will now hand over the call to Mr. Ronad Jaju, our Chief Financial Officer, to give us a quick overview on financials. Thank you.

Over to you, Ronad. Thank you, Vishnu. From a financial standpoint, Quarter 3 and 9-month-26 reflect both strong growth momentum and margin stability, even as we continue to execute one of the largest capacity expansion in the history of the company. Let me walk you through the key highlights of the results. For Quarter 3 FY26, revenue stood at 125.8 crore, reflecting over 31% year-on-year growth. For the nine-month period, revenue growth remains close to 32% supported by the strong education across energy programs and steady scaling within the aerospace segment. Importantly, this growth is broad-based. It is not dependent on single customer, geography, or a segment. Their diversification provides resilience and visibility. EBITDA for Q3 was 60.1 crore. On a sequential basis, this represents growth of approximately 16.9%, and for the 9-month period, EBITDA had grown by approximately 38.4% year-on-year basis. Despite the initial ramp-up costs associated with the new facility and higher depreciation from recent capitalization of assets, margins have remained stable. This instability reflects the combination of improved product mix, rising discipline across long-term contracts, and better absorptions of the fixed overhead and ongoing supply chain optimizations. As utilization level improved from FI27 onward, we remain confident our long-term EBITDA margin profile is in range of 33 to 35% is sustainable over a longish period of time. Profit after tax for quarter three stood at 34 crores, reflecting strong year-end year of growth. For nine months, 26, FAT has grown by 55% year-on-year basis, significantly outfaces revenue growth. This is timely given by operating leverage, stable margin, and interest income from 60% of QIP profits. Notably, our nine-month profitability has already exceeded full-year FI25 level, HEM and FFLN. This enforces the scalability of our operating platform. From a capital allocation perspective, capital deployment continues in line with our expansion roadmap. Every major investment is directly linked to the secured order visibility and long-cycle customer programs. We are not building speculative or idle capacity. Each facility has defined demand backing it. At the same time, we remain financially disciplined. Balanced students remain a priority even as we support long-term growth. Even the strength of our order book, Plant Readiness. Progressive stabilization and stable margin structure. We remain confident in delivering 25% plus revenue growth over the coming years with a sustainable margin in range of 33 to 35% at EBITDA level. Our financial approach remains conservative in Prani while enabling ambitious and disciplined operational efficiencies. Thank you. Now floor is open for question 9 hours.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vikar Singh from ICICI Securities. Please go ahead.

Good morning, sir, and congratulations on a very good set of numbers. Sir, my first question pertains to our next four sets which we are under commissioning. Could you give us the timeline and is there any more dedicated set which we have already tied up with any OEMs at this point of time?

Yeah, so thank you for the question. Look, the facilities which are already inaugurated, right? So that, when we say it's inaugurated, so the building is up, machines are in, and it's ready to, you know, start the… The production-wise, but as I mentioned, before we even start the production, though, like we were doing in our existing facility here, and the new facility requires a lot of, you know, the audits, they have to re-audit the facility, you know, the certifications, the validations, that will take some time. And as we've finished with the Mitsubishi and Siemens, we are in progress, and almost we are in the finishing stage. So as we finish the validations, we start the production. So not all the flow happens together. So it goes with a few machines and a few product lines, and once they are approved, then the production starts. So that's what we mentioned, like, it will be done by, you know, FI-26 stabilization. And in FI27, we can see that we can start the operating, we can stabilize the operations, and maximum utilization starts by FI28. So, it's a process. It's a process that we all have to follow.

Yeah, noted, sir. So, sir, second question pertains to now we have tied up with saffron, and there is a huge possibility of that Indian manufacturing ecosystem for Raffel to get developed in India. How do we see our, you know, what is size with them? Is there any idea which you can give? And effectively, given our capacity constraint is the main hurdle for the higher growth, do we expecting to now go for that 75,000 square feet third facility simultaneously? How should we look at the growth plans from here onwards now?

Yeah, if you speak, if you talk especially about Safran, just to remind you, any of the OEMs which Azad is working today, it's not on the offset policy we work with them. We are a global supplier, right? So if Safran or GE or Bitsubishi or any OEM are giving business to Azad, that's not under obligation of the offset policy. We are a global supplier. So whatever requirement comes in, It goes to the global benchmark, right? So we will not know which country is using our product line and which countries are selling their engines. However, now Safran coming to India, that gives an additional boost to Hazard, you know, companies like Hazard, where we have extra benefits coming in. So, Hazard is playing global as well as will benefit from the obligations what Safran must be having of, you know, doing business in India with the domestic suppliers, you know. So, this is nothing but a bonus. So, that way, I would clarify, Hazard is just not a domestic supply, it's also a global supply.

You noticed that. And so lastly, on the development of that small engine which you were doing, any update on the thing?

Yeah, that's still in the progress. We have finished, I think, a good progress. We are around 70-75%. As you asked me, the progress scale, we are around 75% on that.

And by when you can expect the 100%?

We are planning very soon, I mean, a couple of months, I think we should be able to be in position to deliver the engine.

Notice, thank you, and congratulations, everyone, for a very good set of numbers.

Thank you.

Thank you, sir. The next question is on the line of Amir Dikshin from Goldman Sachs. Please go ahead.

Yeah, hi. Good morning, everyone, and congratulations for a very good set of numbers on all the friends. A couple of questions from my side. Now, if we see the overall ecosystem, I mean, Mitsubishi, GE, all are raising their guidance on energy front. Safran reported a couple of days back, again, a very good set of numbers in increasing guidance. Even some of your peers, like Arrow Edge, for example, has increased its guidance on the LEAP engine, the LEAP components delivery. So in this context, I mean, how do you see the traction in your line of business? Since we are also now, we have a foothold in most of these key accounts. So, how do you see actually, you know, these foreign OEMs kind of coming to you, the engagement with them, has it increased? And in that sense, just wanted to ask that this order book that we are having, 6,500 crores, how do we see the trajectory of this, let us say, in the next couple of years? I'm not expecting a quarter or a, you know, six-month review, like over a couple of years kind of year.

Thanks, Amit. Thanks for the question. And if we talk about the engagement with the OEMs, right? So if you see when we started with Energy, Mr. Vishis or GE and Siemens or any other good, great customers we have, and In the years 2010s and 12s and 14s, what we remember, as we started engagement with all these OEMs, and we were at exactly the same stage what we are with today with Safranes or Rolls-Royce or G or, you know, Brad and Whitney. So, I would say... So, as we progress, as we progress, it's with the qualifications we are doing with the existing, you know, the customers which are in hand, like we signed up with Safran, we signed up with Pratt & Whitney, we signed up with Rolls Royce. And as we move forward with the contracts which we have signed and the product line which we have already secured. All right. But that gives us an edge that we are not new to them now. It's not that knock-knock, here we come, we are Azad, you know, to introduce and we start a thing. It has already started. It has already started and it has started taking a shape. Once this is established, you know, the best part is Azad has got a beautiful track record of delivering, you know, the most complex solutions we can, any OEM is seeking today. They come to Azad. That's the beauty of Azad here. But we can give all kinds of solutions that a customer needs. So that has been established. So what are we waiting for is to just finish the cycle of this qualification. Once this tick-in-the-box is there, and then the door opens, and it's already open for us. And we know what's coming. We know what are the pipelines they have. We know we have the visibility, what each and every OEM is looking at. As you know that these parts are not quarter, as you rightly said, we cannot gauge this by quarter, quarter. This goes in a very long strategy, right? We look at a very forward-looking thing, which has to be very well managed. Before they even give us the production order. So all these preparations are going on well.

Great. The second one is essentially there were a lot of, I think, concerns on the investor side on the possible tariffs by the U.S., but now U.S.-India deal is mostly done. I believe those concerns would be over. Now, in that context, how do you see the opportunity for us shaping up, both in terms of U.S. and in terms of Europe, of course, with EU, India, FTA also in place? I'll give you context. I was speaking to the, you know, the India head of patent with me the other day. And he made a remark which was very interesting that, you know, they are looking to increase their delivery from India by 10x. Earlier, it was 6x, by the way. But after US-India trade deal, they are looking to increase it multifold. So how do you see the US-India trade deal as an enabler for your business? Of course, in all the concourse, you have maintained that, you know, this doesn't really matter for your kind of product. But just wanted to get your thoughts on this.

Yeah, yeah, yeah, I mean, I was about to answer that, you know, that in my previous calls, also I mentioned that these tariffs won't affect the products what Azad is holding, because they are essential, they are something long, long, very long qualification products, where even the tariff goes double, it will not, it will just not go away from Azad, because it takes a lot of time to develop any other supplier. So, in that angle, there is no effect before, there is no effect after. However, the customers at ease, you know, they are more happy that, okay, we don't have to pay the tariff and we are back on track with Azhar. So, that is where the best part about having is happy, happy environment. That's what, that has only changed. Nothing else has changed.

And in terms of cost competitiveness, now earlier there was some, you know, lingering, I would say, doubts that, okay, with 50, 55 percent, maybe the cost competitiveness of other could be compromised. But with now 18 percent, I think it should be very, very competitive.

Yeah, yeah, exactly.

That's what I'm saying. Customers are very happy now.

Before they were like, you know, okay, we are paying Subdarit, but we have no choice. But now we are happy that we are back with Azad and we are happy with Azad. And we are, you know, nothing has, you know, it is back, back to the olden days, how we used to work. And they were more happy than working with Azad on the pricing, the quality, the deliveries. So I think it's, it has turned around more positive.

Wonderful, sir. Great. Congratulations, and all the best. Thanks, Amin.

Thank you, sir. The next question is from the line of Manish Odhwal from Nirmal Bang Securities Private Limited. Please go ahead.

Yes, sir. Thank you for the opportunity and good set of numbers and maintaining the extraordinary execution track. Sir, I have a slightly longer term question on the company's growth and the capital decision making. So, I was checking like since the IPO, the company has built a formidable customer profile and 39% revenue CIGR, which is quite impressive. And we have raised money through QIP and the IPO, almost 940 crores for the funding for the CapEx program as well as some delivery because of that. As I model or visualize agile engineering towards the journey of 1800 crore to 2000 crore company by 2030 given our order book and the growth trajectory which we guided in the past in the current quarter. The growth trajectory achievable without any equity dilution, that is a question, and the financial leverage can increase, that is a question in our investor's minds. And when we interact with the investors, the question is when the Ajax business model will move from capital-consuming growth model to self-sustaining growth model. And I want your comment on the management commitment on that trajectory, how we should build our expectation for that journey for Ajax. Thank you.

Thank you. Thank you for your question. So, let me start by saying, we raised 240 crores in IPO, but out of that, 180 crores were towards debt reduction, and hardly any capital from IPO proceeds was used towards building CAPEX, right? So, we started deploying capital in the newer facility only with the proceeds of... Uh, largely through QIP, where we had raised about 700 crores. Our guidance to the market has always been that we are investing roughly about 200 odd crores in infrastructure, 200 to 250 crores in infrastructure, and the balance 450 odd crores to 500 crores will be deployed towards actual plant and machinery, right, which will be leading towards an output from an asset turn perspective blended across our business. We believe that we should be able to do the journey of, so we were already doing about 450 crores, which we delivered last year through our existing facility and through this incremental deployment of 500, 450 to 500 crores in machines, we should be able to generate anywhere around, you know, anywhere around 1.722 asset turn of 500 crores. So, if you look at that, so that gives us another, you know, easily between 800 to about 1,000 crores sort of visibility, incremental to the 450 that we delivered last year. Now, if you add that, it gives you, it gives you, you know, the entire roadmap from 400 crores to, say, 1,500, 1,600 crores and beyond. Right? Yeah, yeah, yeah, yes, yes.

The second, I think, sir, I'm just looking at QIP proceedings, NOS2 accounts of our filing, where you mentioned that there is a use of general corporate expenses of 156 crore, which is almost 34% of our revenue. So, can you just brief about the nature of this expenditure, where we spend that money, and how the company will benefit out of that? Can you just highlight for us?

Yeah, sure, sir. So... So, as Vishnu mentioned, we are deploying around 450-500 crore in plant and machinery that required around 10-15% has to be deployed toward the ancillary, which required your installation cost and all those things, which amounts to around 100-150 crore. Out of 250 crore, 100-150 crore has gone toward the debt to stabilization debt, and balance has gone toward the long-term capital, and few of the machines which are not part of the QIP we have funded.

All right. And what is the capex in nine months and the capex guidance for next couple of years for our business?

For nine months, we have capitalized plant and machinery. As we have mentioned that we have capitalized MHI, GE, and Siemens plant during the last nine months, which amounts to around 250 crores on the plant and machinery side. And going forward, as Vishnu mentioned, that balanced QIT money has to be deployed over the next one to two years going forward from here in between FI 27 and 28.

All right, sir. Thank you very much for answering my question. All the very best for the future execution. Thank you.

Thank you, sir. The next question is on the line of Mulesh Savla from Shah and Savla. Please go ahead.

Thanks for taking my question. And heartiest congratulations to the team for the excellent numbers, especially when we are ramping up the production facilities, plant and machineries are being installed, employees and people are being hired, and there are a lot of other expenses. Sir, my first question is to Mr. Chokdar. We have an excellent product profile. We have long-standing customer relations and our manufacturing, additional manufacturing facilities are being ranked up. We have already grown at about 30% plus in the past, recent past. Still, what is restricting you to guide us for the 25% plus growth on the top line and not 30% plus? That is my first question.

No, good question. Thank you for the question. As I mentioned, no, the stabilization is very important, right? So, FI26, I want to stabilize, we want to stabilize the zone. FI27 is where we start the operating levels, you know, as I mentioned in the earlier statement also, that qualifications, audits, product qualifications, that's going to take time along with the execution and the ramp up. And when it comes to maximum utilization of F-528, I will change my statement of the growth, you know. That time it will be nice to give this statement at that time. What do you say?

Right, right. I appreciate your conservative guidance and over-delivery, but Steve, I feel that we are too much conservative. During all these years, we have been facing these challenges of expanding capacities and all, and still we have delivered 30%. And with these specific dedicated facilities and other facilities coming up, I'm sure we should be able to cross 30% plus guidance.

This is what we expect. This is what we expect because we are struggling, you know. What we are struggling, building this massive facility, it's not a small facility. Making a world-class factory, having these world-class customers, having the world-class product. And such, such thing, I should, I'm hats off and I'm lucky to have a team, you know, what, what everyone is handling so beautifully. We have a great coordination going on. So all this, we're still giving us, we are still, you know, on the growth of what we are delivering now, which is commandable at this stage, is I would, I would say that. And as it settles down, then there's, there's nothing that, there is nothing that we can, we can be stopped, right?

Great, great, great. Answer my second question again to you is that you said that our gas turbine engine is likely to be ready within another couple of months. So I believe it should be before the end of this financial year. So can you throw some light on kind of potential that can throw up for our company?

Yes, this will be the first jet engine of India. Correct. It's 100% indigenous, right? And this is the first, and the 100% Indian is manufactured in Azad. So when we say it's first, and when we try to, we anticipate it that we'll finish off the deliveries in Q4 and Q3, Q4. However, there are certain things which are jointly done by Azad and GTRE, correct? So there are certain challenges which comes in back and forth. Being the first engine, right, so we anticipate some kind of challenges, but we don't anticipate the timelines. So these timelines are just, we are hopeful that we should, we are in the last leg, right, of the design phase, what GTR is doing, and we are in the last phase of manufacturing. So I don't see any more delays in this, but however, a couple of months, we never know if we see some more surprises, as this is the first engine. So we all should be very happy that we are waiting here to get the first, India's first jet engine out. So, that will be our nation's pride, but if

you can just give rough numbers to what kind of business that it can throw up to Azad.

See, right now, we are not looking at business. Right now, we are looking at to get this engine successful. That's my main focus now. I'm not concerned, but this is the need of our country, and we all should be proud of it. Great, great, sir.

I wish you all the very best. That's all from my side. If I have any question, I'll join back to you. Thank you so much. Thanks.

Thank you, sir. The next question is from the line of Gaurav from Evendus. Please go ahead.

Yeah, thanks for the opportunity. First question is on the aerofalls opportunity that we have. So given that gas turbines are in very high demand currently from the data centers, We have seen globally gas turbine price have gone up considerably in the last one year. So the question is that have you also seen any benefit of that gas turbine price increase as OEM passed on that benefit to you as well, which you are seeing in a good margins currently? That's question number one. And second question is that where are we in the qualification cycle, especially for the engine aerofoils, and how much time you think it will take for you to get the qualifications?

Fine. So thank you for the question. Let me answer it in two parts. The first question, I think, see, we are definitely experiencing a lot of demand, which is coming back to back from our customers directly. And because we are the only qualified partners in India, We are a direct beneficiary of this, and we've been doing it, and plus with the global situation, we are seeing extremely high demands coming to us. Now, it's only our ability to be able to build up infrastructure and execute, which will keep growing our wallet share. In terms of the price, we are not seeing any, so pricing decisions are not being done, and for us, Our contracts are longer term, where we maintain our 35-35% margins and continue to grow on that front. We are not looking at short-term gains from this perspective. We are building a very, very robust relationship, strategic relationship with our customers, which is not a supplier-customer relationship, but a partnership. So this is our intent to do, but we are experiencing heavy demand, so as to say. So that's part number one of your question. The second is, we are aggressively progressing on our airfoil qualification on the aerospace side as well. In fact, if you see these developments that are happening with our customers on this side, is a testament to the fact that there is... There is progress that's happening and customers are recognizing it. That's why we are becoming a part of not just legacy platforms, but also a lot of new engine platforms that will be driving the aviation for the future, right? And across all of our engine manufacturers. So we've recently done, you know, a contract and finalization with Pratt & Whitney, which we notified, you know, there's been progress that Mr. Chobdar spoke about on Safran. Rolls-Royce, we started working in 2024, we should be starting to supply something in FY27. So, all of these things are a mixed bag, but let me... You know, bring about one point which is important to understand, and I think our chairman also touched upon it. See, today, what journey we are with Rolls-Royce, Pratt & Whitney, Safran, and all of these engine manufacturers is what we were with GE, Mitsubishi, and Siemens a few years ago, right? So, B, While we are ramping those up because we've finished qualifications, this will be a journey of qualifications. We will build qualifications to a point, and slowly this will be the next leg of growth for us in the future. But qualifications are progressing really well, and you should be able to see some revenues coming out of the aeroengine department in the coming year. All right.

I have two more questions on the accounting side for Ronak. Ronak, number one is, in this quarter, have you seen the sales of services going up considerably compared to last quarter, which has benefited the gross margins and EBITDA margins? That's number one. Number two, what are the inventory days and working capital days in this quarter?

Yeah, coming to the first question, the business is quite stable and more or less it's in the same line in the historical numbers. And as I mentioned last time also, we don't track business on that particular front like that. On the working capital side, H1, as I mentioned, that we are targeting around 190 to 200 days. We have started working on that direction and the results are coming, but it will take some time to stabilize and it will take. Time to have. And for H2, we are targeting around 140 to 150 days because once we completed all the things on the distribution supply chain and discounting part, we are quite confident it will come to 140 to 150 days time.

No, but my question is, have we seen inventory days going up in this quarter, given the growth?

Yeah. WIP, this is in the WIP and you start reflecting this in H1 and H2 as I mentioned, but right now it's still on the sustainable basis what we have seen in the historical period. This is progressive change, right? All of these things that we're doing will start reflecting over time. Our endeavor goes to finish this. By the end of this current financial year, but I think this is, while the complexity in our business that we spoke about, we are in the ramp-up phase, transition phase, all of this should, so probably in the next about two quarters, you will see the first milestone being hit, and then it will start reflecting in H2 for the second milestone, and we should be able to do this in our H1 commentary for next year.

All right. Okay. Thanks. Thanks a lot, and best wishes for the future.

Thank you. Thank you, sir. The next question is on the line of Vinayak Kariwal from Exponent Drive. Please go ahead.

Hi, thank you for the question, Mr. I just remember Mr. Vishnu Pallik Malpani posting about the hiring of at least 1,000 workers for a new plant in the next three months. And on the same post, I remember someone commenting that they hired 100 workers and that took them 12 months to hire. So, I just wanted to understand how is the aerospace and decision engineering work for situation in the area we are operating in, and what is the progress on that?

So, I think a very good question. So first of all, I think while you can manage everything else with capital, I think capability or recruitment or skill is something that will only be built over time, right? So Azad Engineering recognizes that for us to be able to achieve these goals that we are setting for ourselves, these aggressive goals, we will need a very, very strong team to support this, right? And that's why we're onboarding. Talent at every level, building the skill, training them to be future ready, right? So if you look at, if you look at, I know, I know you're referring to my post on LinkedIn, where I said I want to recruit 1000 people over the next. So the idea is that we do not want the business to be deprived of manpower, because the cost of having employees. What is the cost of not having employees is disproportionately high in our business, right? So we've built an execution engine today that we are able to source about 150 to 200 people per month. We have created a training center internally in a program where we are able to, in about 50 days, we're able to put a person on the training program and deploy them on the shop floor. We are running several. You know, engagement programs in the company which are, you know, which are interesting, which are helping us train, retain employees as well. So, it's important, and I think, yeah, it's not an easy thing to be cracked, but then I think we've taken enough and more measures to solve the entire piece of human resource, and we are well in control, given our targets for the next few years.

Ciao, ciao. And so how, on the margins part, do you expect the margins to dip for the next FY, considering the fact that we are coming up with the start ED, and the utilization won't be up to the mark, which will only hit maximum utilization in FY28. So do you expect the margin dip for the next year?

So I'll go back to, you know, like on every call we say, you know, we would want to maintain our guidance to be in the range of 33 to 35%. But even this year, this quarter, you can look at our EBITDA margin, it's been at 38%. Right? So I would want to still continue to guide 33 to 35% EBITDA margins in our business for the longer term. But, you know, there are always positive shoots that we would want to bring to the market. You know, like we did this quarter. Fingers crossed.

And so last question on the requirement from the three gas turbine OEMs. The data center compute is expected to get TX every year for the next four or five years, and that is a similar requirement of power that the data center industry expects to be rammed up, and the frontrunners in the power on-site power generation are these three OEMs, which you are the only qualifier in the country.

So, I think you've very correctly summarized this, that there's a lot of demand. See, the demand for electricity over the next about 15 years is going to double with what the world needs today. And the only way you can power the world The demand for electricity is by putting up these gas turbines, nuclear turbines, steam turbines, and so on and so forth, right? So this demand is being experienced by all of our Williams aggressively, right? So if you look at their order groups, if you look at their order backlog, then how much orders are they taking quarter on quarter, there's a lot of pressure for them in Delipi because data centers have presented this opportunity and this entire industry has changed structurally, right? So, our conversations are how quickly can we ramp up on the existing product line? How quickly can we move into, you know, existing product lines which are also critical and ramp up, right? So, are existing. Azaz is today, right, holding with our existing 100% ramp up, etc. We will still be doing a single digit wallet share with our customers, right? So if you look at, this is going to grow, right? And giving you an example, right? If you look at how much aerospace, even at $700 million worth of scale that they're doing, they're still growing at 25% year on year, right? To see if they've delivered a 25% growth. So, this is a brilliant time to be in this industry, and we are constantly just looking at newer demand coming to us, newer capacity, and even the existing business is, you know, is to be... Done over the next few years, right? So the backlog is constantly increasing for our customers and so is, and that is just channeled to us directly. And like you said, since we are the only qualified partner in the country, and the only qualified partner, we will be a direct beneficiary of this. So it is in a lot. Best interest to sort of keep scaling up and improving our wallet share existing, and then also enter into newer product portfolios, which we have the opportunity today, right? So these are low-hanging fruits to get into adjacent categories as well. And we are also expanding, right? We are building capability. Don't talk about it, you know, in our earnings call as much, but there is a lot of capability development that we are doing that, you know, will only lead to, you know, revenues in the coming years, which is our long-term plan, right? We are entering into conversion. You know, from compressor. So, every aspect of a turbine, right, right, from a compressor air force to really complex combustion parts also. For land, sea, and air turbines, we are building capabilities for gas, steam, and nuclear turbines, we are building capabilities. I think Azaz is very beautifully present in terms of capabilities that we have and capabilities that we are building right now from our customers' perspective. So, yeah. These are some of the conversations.

So just a clarification, so could we expect, like, more than, like, 40-50% growth once you stabilize the market deep with the three turbine OEMs for the next four, five years?

Demand is there, right? There is obviously a lot of demand. You see, our customers are signing, so if you look at just the contracts that we signed with Mitsubishi, right? So we signed roughly a 100 million contract, 70 to 80 million contract in phase one, and it was immediately in about one, one and a half, you know, less than a year, we were able to sign a phase two of the same contract of a similar value, right? So the demand is obviously there. But our ability to execute these contracts depends on infrastructure, stabilization, all the things that Mr. Choblar mentioned, right? So all the new plants that we're building up, it's not just about building a factory, putting machines and starting, right? This industry does not have a very linear growth, right? All the other industries, this needs a lot of time. And then you see in Azad's case also, 2008 to 2020, we did 100 crores. And 2020 to 2026, we're talking about a number like this, this year we've delivered five times of what we were in, more than five times of what we were. So definitely the opportunity to grow is there, but it relies on Azad's ability to execute, take contracts and execute at that scale. While you were asking me questions on how are we also doing on manpower? So this is a complex project management, right? So you will have to manage every aspect of the business while you're managing customer expectations, you're building infrastructure, you're ensuring that your current deliveries are not impacted, also hiring, planning for the next year, quarters. So it's a very complex mess and that's why while we still grow at 25%, we say that with absolute confidence, right? And that's why, you know, we... We believe that there is a definitive opportunity in the future to see this demand. Thank you. Thank you so much.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and run now. The next question is from the line of Kaushik Mohan from Ashika Group. Please go ahead.

Hi, sir. Sir, I just wanted to understand with the missile engines that what we are trying to do, is those also numbers being considered in the growth rates that we are talking about?

No, sir. Thank you for the question. But the number of projections that we've spoken about, we've only spoken about the customers, what we have in hand today, and not something that we haven't, right, which is in the future. So, the engine development that we're doing. And it's not a part of our revenue projections, if you're asking us. But this is the capability that we're developing.

And what can be the market size if it is possible to be...

So I think the market is huge. You should be able to understand that these are strategic defense drones. This will be used in strategic defense UAVs and drones, etc. You know, single shot device. From that perspective, it will be used in anti-shipping missiles, etc. And this is the first strategic. Jet engines that are made out of India. So, you should think about it. And I will request Mr. Chobhda to sort of give us a little more insight on this.

Yeah, so your question is when we can know because in Azad, whatever we say or whatever we project, when we project whatever is there in hand, okay, what is confirmed and what we can deliver. Maybe in Q1, Q1 we can give you more good news on the engines, we can give you some projections, we can give you some revenues because as we have a practice, we just... Whatever is confirmed, whatever is in hand, we can definitely talk about it. This is a great movement for sure. The volumes can be substantial as this engine is currently being imported by the government of India. And this is an imposed substitute. So there is a massive pressure from the country to develop this engine. We are on the same page with them, and we are putting all the efforts to develop this engine. Hopefully, fingers crossed, we very soon will give you good news in Q1, and we can talk more on the projections, we can talk on the revenues, we can talk on the numbers.

Got it. Sir, I just wanted to understand another thing. With the current order book that we have, the revenue growth rates that we're talking about will be substantially fulfilling its numbers. But I just wanted to understand. What kind of growth rates that we can see in the current existing products and with the current existing clients? What will be the market share that we can increase over the next three, four, or five years down the line?

It's a long question. The question is short, but the answer is very long to this. Can I invite you to Azad and I can show you, you know, because every customer has its own product line. Every customer has their own design, and nothing is common within these customers. So, I have a very long answer for this. I would request you to please visit Azhar, so they can show you more in detail.

Sure, sure. For this quarter, we will definitely come this year. Yeah, most welcome. Most welcome. Thanks for this.

Thank you, Sir. Ladies and gentlemen, in the interest of time, that was the last question for today. I would now like to hand the conference over to management for closing comments.

So, on behalf of Haddad Engineering, our Board of Directors, we would like to thank everyone for joining the call and listening to the performance updates of 4-3-8-5-26. We will – we are very happy to share that this was an excellent quarter, and we believe that we will be continuing the momentum and the guidance that we shared with the market. Thank you.

Thank you, sir. On behalf of Arzad Engineering Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.