Data Patterns (India) Limited (DATAPATTNS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Data Patterns India Limited Q1 FY27 Earnings Conference Call. As a reminder, 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 you need assistance during the conference call, please signal an operator by pressing star 0 on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Prasi Patel from Go India Advisor. Thank you, and over to you, ma'am.

Thank you, Buddha. Good afternoon, everyone, and welcome to Data Patterns India Limited call to discuss Q1 FI27 earnings call. We have the senior management of the company on the call, Mr. S. Rangarajan, Chairman and Managing Director, and Mr. Venkatar Subramaniam. Chief Financial Officer, we must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company may face. May I now request Mr. Rangarajan, sir, to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for the Q&A. Thank you, and over to you, sir.

Thank you, Priyasi. Good afternoon, ladies and gentlemen. And a warm welcome to all of you to the Q1 F527 Earnings Call of Data Patterns India Limited. We sincerely appreciate your continued trust, support, and participation. I hope all of you have had the opportunity to review our earnings presentation. It has been uploaded on the stock exchanges and on our company website. Before Venkat takes you to the financial performance, I would like to share a few key business updates and our outlook for the coming quarters. The quarter marks another important step in a long-term growth strategy as our strategic investments over the past several years are beginning to translate into tangible business, business opportunities, and a stronger market position. We continue to witness healthy customer engagement across multiple defense programs with increasing opportunities for larger value and complete contracts. We secure orders across avionics, radars, electronic warfare, and automatic test equipment programs. From various customers, including Ministry of Defense, DRDO, and BrahMos, reflecting the doing confidence on our technology capabilities and exhibition practice. We also continue to pursue several large opportunities that are currently at various stages of discussion and evaluation. A key milestone for us is the successful transition of several products from the development stage to complete system solutions. This significantly expands our addressable market and enables us to participate in larger and higher-value programs. With differentiated capabilities, we are trying to convert them into single-end opportunities. We are also leveraging our existing technology platforms and reusable building blocks to develop new products faster and more cost-effectively, improving both scalability and speed-to-market. Our order book stands for 2654 cores. Including orders and negotiation, providing a healthy revenue visibility over the coming years. Our international order book currently stands for 39 crores, and we continue to actively engage customers for our global markets to expand our export footprint. We also remain confident of securing around 2,000 crores of fresh order inflows during F527, over and above the orders already received and negotiated. Policy environment also remains highly favorable. The government's continued focus on a higher-indigenous country in defense procurement is creating significant opportunities across the ecosystem, including the armed forces, defense PSUs, and private sector companies. With the strong in-house design capabilities and proven execution to ACRIPOD, we believe data parlance is well positioned to benefit from this structural opportunity. Another encouraging development in the quarter has been the initial traction in our drone and counter-drone business, where we have started receiving orders. We believe that this business will become an important growth driver as demand for indigenous unmanned and counter-aware solutions continue to increase. Coming to the quarter, our revenue trajectory continues to remain on track. As indicated earlier, we continue to invest in strengthening our engineering talent and future capabilities. Resulting in higher employee cost base is expected to remain elevated over the coming quarters. In addition, changes in the product base also impacted margins during the quarter. There are conscious investments that strengthen a long-term competitive position to prepare us for larger opportunities ahead. Looking ahead, the outlook of the Indian defense sector remains highly encouraging. Support by our robust auto-pipeline, expanding product portfolio, increasing export opportunities, and favorable policy content, remain confident of achieving our full-year growth during the 2021 percent revenue growth while maintaining EBITDA margins at the 35-40 percent range. We remain committed to investing in the technology, innovation, and indigenous capability development while creating sustainable long-term value to all our customers. With that now, I hand over the floor to our CFO banker. Thanks for the financial performance in the area.

Thank you, sir. Good afternoon, ladies and gentlemen, and thank you all for joining us today. Let me take you through the financial highlights for the first quarter of financial year 2027. Revenue from operations for Q1 FI 27 stood at 116 crores, registering a healthy 17% year-on-year growth. Driven by continued execution across our diversified defense programs. Gross profit increased to 16% year-on-year to 91.5 crore, while gross margins remained strong at 78.9%, reflecting the high-value nature of our product needs. EBITDA stood at 31.4 crore, with an EBITDA margin of 27%. Margin during the quarter were impacted by high employee cost associated with capability expansion and changes in the product mix. Profit after tax stood at 22.1 crore with a packed margin of 19%, reflecting a temporary impact due to uneven quarterly revenue. The company continues to maintain a strong balance sheet. Remaining net debt-free with cash, bank, balances, and investments of Rs. 530 crore as on 30th June 2026, providing ample flexibility to support future growth initiatives. Our order book stands at Rs. 920 crore as on 30th June 2026, with orders received in July and orders negotiated. The order book currently stands at Rs. 2,654 crore. We remain focused on disciplined execution, operational efficiency, and prudent capital allocation as we continue to invest in technology and support the company's long-term growth. With that, I would like to open the floor for questions and answers. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press the R and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may pay a star and two. Participants are requested to use hands-up 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 Haratek Rawat from IIFL Capital. Please proceed.

Thanks for the opportunity. Sir, first question will be with regards to other expenses. So, while our gross margins have largely, you know, not changed much on a YY basis, and despite only 17% sort of growth in revenue, our other expenses have risen by 64%. So, is there anything that is peculiar about other expenses in this quarter?

The increase in other expenses is due to some additional repairs and maintenance costs which is incurred because the facility is now going through some revamping, so we had to spend some additional expenditure on repairs and maintenance, and also close to 2 crore we have additionally provided for against the long pending receivables as per our policy. These two have contributed increase in the other expenditure, otherwise it's in line with our budget.

Got it, sir. And, sir, on revenue, in the press release, sir, alluded to the fact that there were some temporary delays in customer approval, and we are expecting normalization in the coming quarters. If you could provide some information there, sir, is there any quantum of revenue that was basically slipped from recognition in this current quarter because of this issue?

We can't be specific because it involves customers. And I can't talk about an open channel. We had these issues, we had these issues in the past also, where products are ready, but the inspection team doesn't come, because their own requirement to deliver is probably got delayed. So automatically, they don't come to expect. But these are all operations, which will continue to be there, as long as we are dependent on them with the... And, you know, the order book model to revenue model being very near. So, these issues will come into the picture. We try and manage it by other orders excluding other orders to see that our projections are maintained. But sometimes it is not feasible because we are not a quarter to quarter business. We are a yearly business and all the projects are long term. So, it is not a production month-to-month and day-on-day production business. So, obviously, it has an impact on our revenue quarter to quarter. But having said that, the important thing is to, how to alleviate this for a quarter performance deviation is to see that the order book substantially goes up for at least three years of our revenue projection. Then we will be able to position to say what quarter wise we should do and how do we deliver this. So data patterns is leaning towards getting a sizable order book in the coming year or so, two years, to see that we cross the three, three order book revenue projections. Then we should be built in a better position to handle this kind of problems. So I think you need to bear with me for some time until the autobook starts coming the way we want. We've invested substantially in product development, continue to invest substantially in differentiated products where we stand alone in some of the markets, and those are very desperately needed by our MOD. So as and then that happens, the autobook will substantially increase. And we believe that our revenue predictions will be met in order to quarter. As we go along, it's going to take a bit of time. Till now, you need to be patient on a yearly model of growth, what you are doing.

You got it, sir. That's really helpful. So one last question before I fall back in the queue. Sir, our order book orders negotiated but not yet a part of our order book now stands at about 17 odd billion rupees from 1726 odd crores. Sir, if you could just help us with the timeline, as in, you know, how should we expect this to turn into order book? Should this convert into order book in the, say, for example, in the next six to nine months? What is the average conversion, timeline to conversion to order book for these orders that have been negotiated?

Okay. This question is asked during our AGM morning, and I almost slipped to answer this question. Anyway, we will write to the shareholder and address this. See, this order book normally should not take this long time to get converted into contracts. But in this particular situation, because it was long, there was a big program, and the program position delays on finalizing the program before the order can get placed, it went to certain approval stages, and it took a lot more time. It's taken an additional six months in what it is. The whole program has been stretched by more than one and a half years because of which some of the contracts we expect out of the programs, no negotiation is completed. The order couldn't happen. But what I'm told now is they've taken additional extension for another two months from us. So we expect another two months those contracts should happen. And also some of the orders we expected. The order has gone postponed. We didn't negotiate the orders. We did some negotiation, but we got a lot of protracted negotiations. That's also coming to an end now. That also should happen. So, that's why these orders will get converted in the next few months. Actually, it has converted in a week, two weeks' time, but maybe it will convert in three months to give us a safer side. And the order book is there, and we have already negotiated this contract. These are all long-term, larger contracts, and that is how the decisions and delays are happening. On top of that, we have also told as part of opening remarks. Other than the contracts which you are seeing now with the order book, we are also pursuing some very large single vendor contracts to the extent of another 2,000 crores which we expect to happen through the course of this financial year. So I think the order has slowly started going the way we want. In the coming years, it will go substantively, it is what we believe.

Got it. So that's really helpful. I have more questions. I will call back. Thank you.

Thank you. The next question is from the line of Rishika from Goldman Sachs. Please proceed.

Thank you for the opportunity. Sir, could you please share an update on the testing of Jammer pods for Su-30 along with the revenue contribution you're expecting from this in the medium term? That's my question. Thank you, sir.

Okay, as that product is going on well in the development stage, Customers had a view of the product, and they said they are quite happy with the progress they made on the transport. So we are going through the qualification exercises to, you know, maybe aircraft and flight. I believe that that should happen before December. We should have the first trials to start there. Maybe a few months of flight trials to satisfy the requirement or specifications. I think the commercial I have a number in mind because you know what you are working on, otherwise you don't invest in money, but I think it's not appropriate to talk about a future order which is not yet as calm as an inquiry or tender and to say how much business you are expecting out of it. There are two kinds of contracts we are expecting. These are all 70,000 crores. And at the present moment, we are unique to position in these contracts. Exact value, we would not like to disclose at the present moment. Towards closing, when the contract happens, I expect in the next two years' time, these contracts will start happening, and that's the right time to announce. We are working with really large opportunities, and we took money from the 380, only to 20 such developer programs. They will be confident of our IP creation and our community abilities. It's a multi, what do you say, engineering approach, building the pod, building the cooling system, building the electrolytes, building the algorithms. It seems that it's a complex system. It goes to quite rise. We're taking the challenge to this because we need to scale our business substantively in the coming years. So that is why we're doing deep for kind of product development. It's going to be larger horizon, more maturity, but we're on track.

Thank you, sir. Sir, secondly, could you please share more color on why did we have lower margins this quarter, and how are you expecting this to pan out in the coming quarters for FI 27?

Actually, we didn't have lower margin. I don't know. Look at the last margin. The last margin is higher than what we've done last quarter, last year, last year, first quarter. But what happens is the low rates are fairly high, because whether the delivered products are not this year, this quarter, we continue to spend on people expenses, which is probably one of the highest in our industry, we spend on that. Then, we can explain to you that the other expenses, right off the state of state, that is another cost, depreciation, and all of that.

Basically, uneven revenue in quarters, you have to look at it only annually. Because the revenue is not distributed evenly through all the quarters, and the expenditures remaining almost the same quarter-wise. The contribution from gross margin that is distributed with a higher cost, the margins are seen lower. Otherwise, we are confident of achieving the full-year, you know, targeted margins.

Our budget was in the year-end targets. Quarter to quarter, it will vary depending on what is the level of turnover we achieve.

It's very much in line with our internal targets.

If revenue is one quarter, it's one fourth, then the margins will be same. Since the revenue is not equally distributed across the quarters, you're finding this so-called EBITDA margins coming down. That's not true because the last margin remains very healthy. That's the actual fact.

Sure, sir. Thank you. Thank you. The next question is from the line of Deepane Vakil from Phillip Capital. Please proceed.

Hi, thank you for this opportunity, and congratulations on Decent Execution. So, my first question is on order and close-up. So, one thing is that we have negotiated contract worth $17 billion, and of that, I believe that last quarter we had mentioned that HAL has an order of more than, say, $10 billion. So, whenever it gets converted into order book, what would be the timeline of execution of that order, considering that it's one large order from a single client?

Okay, see, this varies with the contract, varies with the customer delivery. For example, if you take a chair, they deliver the aircraft over a period of years. So then, though the order is given one lot, execution takes over a period of time. So that is one. If it is a project order, the value is high. Project execution maybe is about 18 months, 24 months. Then the project has fixed within those time frames. It was a response subsistence order. This is Bambia view, then the deliveries are faster because all the contracts take longer delivery time based on the actual application and the demand of what has to be delivered, developed and delivered and integrated and accepted. This actually varies from few months to maybe two years. So unless we work with every product order, I can't answer the question correctly. Thank you. Thank you. Thank you. You all too much, sir. Really decent delivery in over two to three years time. We actually expected for higher delivery delays that they are saying, okay, this is to be negotiated. Whatever we have talked now on the orders negotiated, do not include HIL contracts. We are under discussion on all these things. Negotiations are on place. I found that a lot of people are asking questions to me directly regarding M portal. I didn't comment on it because we can't do a negotiation, it's a single bit of a contract because it's initiated and we're going to the negotiation. As and when it happens, we'll publicly announce it in the stock exchanges and on our website.

Got it. Got it. That's increasing to hear that it's out of beyond the 17 billion negotiated contracts already. So, yeah, that helps. So, my second question is on the lines of counter-trone business and export business that you mentioned that are gaining fraction. So, what would be the product portfolio likely that is gaining fraction and are we supplying the complete platforms or we are looking at more from a subsistence play for the counter-trone business as well?

We are not in the platform business. That's a block. This is the center business. So, we have two or three areas where we can do counter-door. One is active detection, that is in radars. We build the full radar, which are required in quantities for counter-door requirements and operators. That we fully develop, and we have some unique products there, which meets EMODE requirements, which is not yet addressed in India, so it is imported now. So, we believe we have a good auto pipeline. We've already started getting contracts. As we go along, we expect a far more healthier auto book on the active detection. Second is the passive detection of counter drones, that is, on electronic intelligence and communication intelligence. Decode what is happening in the drone, and then locate where the drone is, direction of the drone, and then... This is another idea. So we've already done a host of products in electronic intelligence, modernizing these contract things to suit this market size. And that also is almost getting ready. We expect contracts to happen there also. The third idea is not only just Thank you. Some of the applications are also very varied because they come across these drones, and they want to even target the drones into the end

projectile.

So there also the direction or the radar and pressure subsystems are required by them. So there's a requirement, very, very kind of requirements are coming up for the market. And MOD has decided to place in order of a multitude of these vendors to experiment 10.20 systems in each. So, a number of them have started approaching us for suitable sensors for all these applications. So, we are working with them, and I think in the next 3 to 6 months time, these contracts will start getting fructified and we should approve this. This is on the counter zone area. On the exports, we continue to build for the last few years signal process for radars, airborne radars for UK company. And now we started getting the first orders we got last year for an antenna, redesign of an antenna for an up-source management for a fighter aircraft system. So, we will be delivering it in the next 6 to 8 months time. There is also a lot of interest from the same organization, it is a multi-national. Very large corporate in Europe. We have other areas, we have given proposals to many of these systems. And they are very keen to see that use these systems because the timeframe which we are talking about is far, far lower than what they expect their own organization to build. Especially with Europe having manpower shortages in this area and certain requirements of contracts and scaling up. We find a lot of opportunities are getting created for us with our competency in building products. Daily bit timelines is very short. So, I expect that business also in the next few months time, for multi-million dollar business, we should start getting. Third area, we are also looking at the civil aviation kind of upsellers management and upgrades. Again, very large OEMs in the US. We expect that those contracts will also start coming in and exports. See, our normal business has been in DRDO, MOD, public sector. That is what the business has been here. We want to now look into the new markets, which is the export business. There we do product development, our IP goes into their requirements, and the market sizes have become much bigger. So, there I can also look at a business which is an annuity business, not just a project inventory. So, very keen, we're putting on an export group to address the market, and I think in the next two to three years' time, scaling substantially into export business should also start.

Yeah. Got it. Yeah, sir, just one last question, if I can squeeze in. Sir, can you comment on your acquisition on FT-Advanced, and what is it targeted at, namely as to what kind of product, whether it is, like, and how it can increase our market opportunity? So, are we targeting it mainly for, like, MIG-29 upgrades and SLU-30 upgrades, or there is a much wider application for this acquisition?

It is technically a very sound company, a small company, a very sound and very innovative organization. We believe that in the sensor radar business, we also have to have a company for renewals, both for electronic intelligence as well as for radar requirements. This is one area where we are already giving contracts for it, and we are getting the products developed from them, which is working very well for us. It is also supplying to Barth Electronics and other organizations. The advanced composites for aircraft systems in Mi-29, etc. So, the important thing is to try to see whether we can enhance these capabilities, hold it into the larger requirements which we have in India and abroad. Both India and abroad, along with our sensors and parts of our systems, is a requirement of composites. So, if you can combine this together, if you have a whole system rather than populous system, customers are much more happier because they take a full contract to develop for the system. So, we thought this is the right approach to build an ecosystem which can feed each other's capabilities and grow it as overall some game will go up. That's the reason we took it up and we need to do a lot more work to bring this company up where it is today to a much larger scope of business. And we have a lot of ideas for that kind of capabilities which the promoter of the company has, and we've had some discussions with them, we want to spend more time, ideate with them, invest in the company, to see that infrastructure is created and prepared long-term development plans for these contracts, where we have a sustainable business model for its growth. So, at the present moment, it is a bit too early, because yesterday only you finalize with And we need to spend more time and work on the strategy. But yes, it's a small company. We believe it's an important acquisition to both that company as well as us, that you can view a product covering as a whole. And also look at some export versions which will directly go to him as well as to us, to see that we increase the business.

Got it, sir. Thank you so much for answering my question, and all the very best for FY27.

Thank you. The next question is from the line of Beneet Passat from Investec Capital. Please proceed.

Hi, sir. Good afternoon. Just a couple of questions. One is if you can broadly highlight larger platforms which you are focusing on to participate in, not as a platform, but more as a subsystem developer, and that too, not from a near-term perspective, but over the next three to five years, where all can we participate and contribute? That's number one. And number two, just wanted to hear your take on Hem Shakti project. Where is that? We were going to receive a few orders. Have we received those? Or what's the project status there?

Okay, on the larger platforms, there's a mail program and bigger mail programs that's taken up. Large events have come from tenders. As a sensor developer, most of these are all now on the existing vendors, are all of imported origin. We believe we should make a mark in providing our products in these areas in terms of radar warning receiver, communication intelligence, electronic intelligence, the IFF.

Radio relays.

There are so many areas that we can work on as a full system and give intelligence contribution to these kind of big programs, larger platforms.

We are actively engaging with two or three companies

to offer them to these, go through criteria with them, see that repeat requirements can come in numbers as we go along. The market is changing from Man to a man. So, there's a lot more opportunity to come. The same thing also will be applicable outside India. So, on a combined system, if you can do this in India, along with the platform, you can also be exported. So, these are exciting new opportunities. We already have existing competencies in products. These are already quite proven. I need to tweak it for the particular platform in mind and see that we go through tiles. So this is one area we're looking at. We're also looking at the smaller drones for various other surveillance applications that we can output the systems. We are continuously getting calls from various UAE manufacturers to see how can we give sensors for their birds. So we are exploring all these opportunities. Their competency exists and a mutual benefit in terms of giving a proper product to end customer at a very high, fast turnaround time can be addressed. These are areas which we can do in terms of platforms. We are also now looking at how to build these kind of products for naval platforms. We are going to start a discussion now on giving very modern systems for these larger platforms in the Navy, and also some of the upgrades which India is going through for various aircraft upgrades which goes through, same sensors which we are talking about in terms of GW and The first question is asked on the SPJ is one such requirement, the electronic warfare suite is getting, you know, developed for the supply safety platform which is only 270 of aircrafts. So similar aircrafts are there, multiple systems are happening, and also DRD is also taking up a number of Airborne Netra 2 and whole lot of other projects. So, on a product level, we have assessing markets and seeing that we can reuse these products for various applications. There are a number of such applications. It will take a lot of time to go through it, but I am giving you a flavor of your own business. There are a lot more areas where we can actually look into the products for those kind of products. Thank you. They are also talking to us to see whether this can be fitted for the next generation platforms. In the meantime, we are also upgrading our technologies with this, adding more value in terms of not just the hardware and software, but also the wear of contents, also the antennas. We have a large antenna division now, we design it to optimally solution the end product, not depending on foreign companies. And define for the applications, give you much better product performance. Also, we are not keeping quiet the last two years. We have done a lot of development in all three years. And the development is still on for QG generation programs and communication intelligence, RWR and things like that. We are not waiting for the contract. We are going ahead, building the products will be ready in the next few months time. We expect that the technology edge that we have should be able to convince the customer and the end user that these are the appropriate products for their requirements. But I can't comment exactly on when the contract will happen.

Understood, understood. And so lastly, on the Hawk Redars, which you've developed, have we found any application out there or any way to monetize what we've built? And could that find a way into 230 upgrades or some of those larger platforms? So any discussions with the customer, any indications where we can monetize such a fantastic product, anything on that front?

Sure, we have done the hardware for both the MiG as well as the 530, but then we need the software for them. The original concept was we get the software from somewhere, it didn't work out, but the hardware we went ahead and developed this at last. So, we are in discussion with the RDO to see whether we can collaborate with them for putting this together. We are also discussing with the Russian counterparts on the OEMs to see whether both are going ahead. I can't very clearly say which will happen when, faster. We expect the next two to three months time, we should get some breakthrough in this, then our systems can get, the software can be ported, and then we go to flight trials after that. We're also investing in extension, the HOP program, and extension radars, which will be what is production-oriented line. Also, we're going to develop in the next six months' time. As the first contracts come in, we'll be ready with the second, and the more advanced systems of that nature will also be available to give a technology edge to the end customer. So, we are waiting for this to happen. In the meantime, we're also developing our own software now. We just started developing our own software. We're on platforms using UAVs as a platform for our trials, which is what some of our events are doing. So we are also going on the third thing that we develop the systems. As a complete system we develop, then we are not dependent on any organization or technology to drive the business orientation. That also we have initiated. It will take a few more months before we get a correct path as to where it is going to go. But yes, we are determined to see that these products work in life and we are putting efforts to see that the more modernizing the system is learning from mistakes. Connecting it, building additional software capabilities, do a whole lot of other stuff to see that this project is successful, but it takes some more time. We have to move data on in the process of success.

Understood. Understood. Fair. Thank you so much, sir. Thank you.

Thank you. The next question is from the line of Kavish Parekh from 361 Capital. Please proceed.

Hi, sir. Thanks for the opportunity. Sir, do we have an update regarding Ramos? We have been supplying fire control systems for the same and also have been working on developmental orders for seekers. Any color on timelines for receiving commercial orders for these seekers?

We expect this should happen this year, this financial year, but the approvals and qualifications should take the time. The products are ready. As soon as the qualification is completed, the proof of right trial, I think the contract should happen. Or even when the qualification is over itself, the contract should happen. We believe that it should happen this year. We expect it earlier, but there are some delays. Anyway, we can expect this to happen in the full end of this year. A lot of the positions that you have were... For this year, revenue on the product, water intake. So, lot of revenue, but water intake for this year.

Mardu, do you have any comments on development of new subsystems for Ramos? If we do that, what incremental wallet share are we targeting to gain here? And lastly, again, we've seen Ramos has seen increased interest from a few countries, and we have also from other suppliers to the program about them ramping up capacities for those respective components. How are we placed to meet the growing demand for Ramos?

See, what happens is once you develop a product, various vendors are developed towards Thank you. Second, also we are talking about the next generation propose. If the next generation propose happens and they don't select us for some of the programs in this, we will be very happy to see that our early in business to them also can go off. We have the capability, but whether it will happen or not is something that we cannot guess. The capability exists to a whole lot of stuff. In the last 20 years, the nominal capability they built has happened across domains. So, we can do very fast on our time, depending on how it needs.

But that's all I can say today. Got it, sir.

Thank you so much. All the very best.

Thank you. A request to all participants, please restrict your questions to two questions per participant. For more questions, please rejoin the queue. The next question is from the line of Nilozbal Sahu from JM Financial. Please proceed.

Hi, sir. Good afternoon. Thank you for the opportunity. Am I audible?

Yeah.

So, my first question is, on this existing order book for 2600 crores, can you give us some color of, like, how much of these are production and what level would be development orders?

I don't know. I'm not classifying it accordingly. I'll give you a direct answer.

I think it will be have a classification of this.

Oh, sorry, sir, can you please come again?

Could not hear you.

No, no, I have not classified it. I don't have an answer, but Venkul is only into the orders and seeing, giving you the data, but come to the second question, if you have.

Sure. Secondly, on this order prospects that you have of 20 to 40 billion, these would include the potential HAL order as well as the Brahmo Seekers order. Is that understanding right?

Yeah, Brahmo Seekers also is a potential order. Until the contract comes through, everything is potential only.

So, this is criminal prospects, right?

Pardon?

These are included in our prospects for 20 billion of single vendor orders that we are targeting?

Yes.

And the HAL order would also be included in the same prospect?

I believe so. Some portion of it, I believe so. 20 billion. Yeah, as part of the additional order.

Additional 20 billion, it is included, not as part of the negotiated.

Oh, understood. Understood. Also, sir, can you highlight some of the prospects that are currently under development aside of Ramos, wherein you are expecting conversion to production orders like over the next two to three years? Okay to not mention the quantum, but just broadly on the product lines?

See, I don't know how long you've been following data patterns, but we've spent a substantive amount of money in developing... Space, you know, air difference, long range radars. Those are very, very well appreciated by the customer. The systems have been delivered and, you know, they believe there are strategic importance to India. So, there is a drive from the customer base. The multiple such contracts could have to be executed across India to see that we are protected from the space, free into vehicles and things like that. Back-to-back, I expect in the next one and a half years' time, substantive business running with a few thousands of crores for such contracts, where we have a competency established in terms of electro-organic systems, cooling systems, electronics, software, everything put together as a complete radar. We will be the first company to do that in India, and the development is us. And it is well received by the customer. We leave some more orders for them. This is a very exciting time for us. And already there are some enquiries in this area. Modified systems which have already been delivered for applications which is on air defence. So there is a number of contracts we are expecting out of that which are not shown in this 2 billion or whatever 50 billion we talked about. This is expected probably because still no enquiries have not come so we have not included all of those things. So once and then it happens, and we have a goal of this, when the water comes, we launch it. But yes, we think we are looking at a larger business proposition of an addressable market of more than 40 to 50 billion. For, you know, for this, what, a billion, a billion? Yeah, 4,000 crores. No, it should be around 40,000 to 50,000 crores. It's what we are trying to address markets with our products. So, we are looking at a very large size product mix and a lot of complex systems in this, but that's where the direction of the company is being driven today. It is a very large growth as we go along, if we are successful, but of course these are all in the future. But yes, the premise products we are talking about in this, it's already worked well. We expect repeat contracts and all of these areas as we go ahead. We are expecting substantive growth in the coming years, based on already exhibited contracts, new products, and development. I don't want to be specific on what products are being developed on an open forum now, but we are very clear which markets we want to address, and we want to address it, and then we are developing products for those markets. Even whatever you deliver has got a substantive potential for several thousand crores of additional business communication.

Got it, sir. If I may squeeze in on a small question, lastly, what is the CAPEX plan that you have for the next two years?

Yeah, there is another thing which we are going to spend money, spending money on product development. We are also spending a whole lot of CAPEX, maybe 200 plus, we should be able to spend more than that in the next two years' time. For infrastructure abilities, we want to build an insolent building with car parks and things like that, and also some clean rooms, some integration facilities, and in the last contracts, the volume will come into the future, where we need to set up protections and lines, and testing and in-process testing, see that the reliability is maintained and the re-initiation was also met, meeting customer requirements are done. So a lot of investments will also happen. We started the investments, actually, we started the foundation work already in the building. And some of the infrastructure equipment also place order in order to the units are coming here. So the large investments will happen in the next one to two years' time as we go along because we will do this in parallel to order expected. So the execution also is kept in mind to do this. We can't do it sequentially, we are doing it parallel. And today we are investing a lot of server money because of AI, a lot of investments also happening into the servers, IT infrastructure to support AI-driven initiators for the companies taking up very seriously. So these are investments which have been made in the coming few or two years.

Thank you so much. Thank you. The next question is from the line of Arnab Bhatt, an individual investor. Please proceed.

Hello, sir. Hello. Sir, I firstly just wanted to understand, you know, there's a question put to you, I think, one year or two years back around space, and then that's not fine. I think it had basically deferred it. But what is your stand now in that area of things? Because I believe that we are seeing sort of some traction in that sector.

We discussed this in the board meeting yesterday also. We discussed this. We have a capability to build different satellites, but we need an order book to do that or an indication of a contract for us to invest. We have the money, we have the competency to do this. We have taken money to actually invest in building those satellites. We are actually doing basic design work which we are doing. We are going to be commercialized and go ahead. This is depending on our interaction with the government, find out whether the funding will happen and the actual need. There is a need, but that has been postponed because mostly the Department of Space Services is need. And now what happens is a lot of startups in the space. So they are all doing everything free of cost. They are getting valuations and getting free of cost. They are trying to develop these kind of space systems and satellites. Now, we won't want to take that model. We would like to have an understanding. We don't mind investing now, but we need to look at the revenue model as we go along and the bottom line business go along. Carbon really exists, but I'm still unsure about what investments will happen in the government. And then based on which we take the decision, we give ourselves a few to four months time to see that we take the decision on how to proceed with this. So that's where we are now. And as I mentioned, clarity happens, I will definitely inform the investors.

Thank you, sir. My second question will be around acquisition. I mean, I do understand that this is sort of a backward integration for our business, but we won't bring any value to this subsidiary. This business of art, right? They're not capable of material science. How do we plan on, you know, grow this company from, grow that particular ceramic company from here? What is our stance on it? How do you plan to do anything about it in the future?

Contribution company doesn't have to come only on technology. Contribution company comes on revenue growth, out of line business. So many things come when a small company is there, isolated, it's very difficult for them to address and even access the market space. And they mostly code on lowest code bases and make a lot of laws. This is what maybe happens to most of the SMEs. So you need to graduate from that to see that you have access to markets. And we have access to investments, we don't get into capital issues, and also to see that the revenue businesses for new markets are also broadened by the larger company. I believe we will do that for this company, bring in the larger market audiences, and then expose themselves to bigger requirements and larger requirements which can scale to happen substantively. Bring in the investments necessary, see that we can deliver on the promises made to end customers, a whole lot of other things on our process, whatever we developed over the many years, the strength of our process, see the mistakes don't happen, the quality consciousness, the QA procedures and inspection systems, what we can do, and see that the process is also done and passed on, see it commonalizing, homogenizing the whole system. This is where we think we can add value. And we will bring substantive business as we go along to this company. This is our belief. I believe we will do this. It will take some bit of time, but I think we will do that.

Thank you, sir. Just one last suggestion. If you can upgrade.

Sorry, I do interrupt you, Mr. Arnav, but can you please rejoin the queue?

Yeah, I had no questions.

Thank you. A request to all participants, please restrict your questions to two questions per participant. For more questions, please rejoin the queue. The next question is from the line of Krishank Shah from Dam Capital. Please proceed.

Hi, sir. Thank you for taking my question. Sir, I just wanted to understand one thing. That was the development of the Hawk-based radar that you were talking about. As I understand, Astra Microwave is the DCPP partner for it. So, I just wanted to understand what are we trying to do there?

So, Hawk radar is ours. There is no partner.

No, Hawk radar is yours, sir. But what I'm trying to say is that Astra is a DCPP partner.

It's not a DCP partner here. Astar is a DCP partner for an LCA variant, not an ESO-30 variant, as I understand. Maybe they have one part of the antenna being supplied by them, and Dell is also a second customer, a supplier. So they are developing the products. They have an independent development scheme from DRDO. They are doing it in parallel. That is where it is, so it depends on, say we can qualify our product and get a contract, or we do not qualify it, and they qualify it and they get a contract, so both are possible.

Okay. Just to understand from my understanding sir, so basically the DRDO is going to be making the software bit and the Astra is going to be making the hardware, right? So the integration will be done by DRDO. So just to understand that if you're making the Hawk radar, so the software will ultimately have to come from DRDO if I'm not right, if I'm not mistaken, right?

I think this is one option. As an option, you can develop the software and also put it. Software can come from third world countries also, other countries also. So, it's a full product offering. Air Force, per se, do not mind where it comes from. They're willing to give us the aircraft platform to fly and qualify. Those processes will have to go through. The requirements have to come up. So, it is not specific that only this will happen, only that will happen. Market is open. It is up to us to prove that the product is capable and prove to customers that this makes better sense. So, then we will get a contract. So that is what we are trying to aim, not really go to logarithms as anybody else, but it is a parallel path which we have designed, and here we have the full system, every other part has also developed, not just the antenna, signal processor, the cooling systems, a vapor compression machine, and everything else, the entire thing, including the radome, we can develop. So with the other part-time company we have. So a whole lot of stuff we can develop for the end system to take the load off to the end customer and maintain that for the next 20 years. So there are advantages in one or the other. We're trying to see whether we can give an offer or an advantage due to DRDO to see whether we can work together to build a faster program, product, meeting end specifications. Can we do that? So this is based on technology. We're trying to push it. Let us see where it goes. Got it.

Thank you so much, sir. Thank you so much.

Thank you. The next question is from the line of Abhijit Singh from Systematics. Please proceed.

Thank you for the opportunity, sir. My question is on the naval program, sir. There has been a lot of KPEGs happening on the naval side. Sir, do we have any plans to increase our share coming from the naval programs? I, correct me if I'm wrong, but right now our exposure overall, if you look across the three services, I think in terms of naval exposure, we are comparatively lower. You can correct me if I'm wrong, yes.

But what is our plan going forward in terms of development and production, the participating in production programs for the naval side?

Given that we have a substantial market, a lot of CAPEX happening on the platforms in Navy. We hope to work with DRDO on the naval platforms on developing some of this. For example, we are actually doing parts of the system. It doesn't actually go to Navy from us. We work with DRDO for the sonar subsystems, the basic communication links to sonar boys. All this has been done, and that has been put throughout the electronics and others. We are also building some of the products on the airborne systems for the naval applications. We also got a couple first orders from DRDO for the radar for naval applications, two radars for naval equipment, you can also go into some multiple as we go along. Similarly, our radars which has been hardware between design and software done by DRDO, requirements of 30-hour systems for postcard. We hope that we can win that contract. So on sensors like this, we are doing it. Now we are also trying to do an outreach to do that on electronic intelligence. We can do it directly with the Navy. So we are going to start dialogue with them and fit an aircraft, fit the systems to the Navy platform. We are going ahead what we can do. We are also talking to Navy in terms of their mid-29 and other aircrafts. They are the jammer and things that they require. We are trying to outfit and upgrade the existing jammer. So, we are doing a whole lot of stuff and sensors like this, and we are

going to see whether more opportunities can be created.

We have a neural officer in Delhi working with us. And his task is to find out, in our areas of expertise, can we look at some applications? We have identified a few, and we need to pursue them.

Right, sir.

And lastly, on the order inflow prospects of $20 billion that you mentioned for the current year, sir, what is the risk of those orders getting delayed? Those orders would be linked to some of the last projects that, you know, we are expecting, part of the subsystem that we intend to provide. So what are the risks that you see that those 20 billion worth of orders within them,

that they could, you know, get delayed to FI28 on the order?

Even that we already have some kind of delay in the negotiations.

The business is already off.

Tenders are already on.

I have already addressed tenders and given the tenders.

That is why I have given myself nine months to see if the contacts can happen. Really a month before this, this contact should happen. What we have not projected to you in the pipeline is that tenders have not happened, so we expect a substantial, much larger business. Tenders have not happened based on already delivered products. Tenders have not happened, that is why we have not projected it. The pipeline, we are looking at the market, that is why we say more than 40% close market we are looking at, and where we have products equivalent at this close market. So, as and when things come nearer to Tend to each day, you are glad to hear what happens. We will turn off tomorrow. Thank you, sir. Thank you for answering my questions.

Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Managers. Please proceed.

Hi, sir. Thanks for the opportunity. I just wanted to understand what will be the market size or the addressable market for a key product. If you can just help me understand that. And second question was regarding the counter-drone business that we are looking at. What could be the total revenue or order wins over the next couple of years? Yeah, that's it from Mayan.

Okay, sir. Investing in products is an addressable market value of about 30,000 crores, and based on what you've already developed. Repeat contracts, we're looking at another 10 to 40,000 crores, so we're looking at the market of about 40,000 crores. We have an estimate of when this happened, but it's a bit premature for me to talk about it now, because it's not up to the stage that I can disclose these things. But the address of market size, the idea is to take the API and start product development to see that we're scaling from a small company to a large company, and we're actively doing that for getting differentiated products which will be developed in-house. With our money, and take it to trials and convince customers that the products are working well so that their immediate needs are addressed. So that is the idea with which we took money and we are spending money on this. We are also spending continuous money on our early learnings also. We spent a lot of money on building products for immediate next year kind of customer requirements. So that we get a unique position in this with demonstrations and products. The idea is to build a substantive scale. Subtract the size as we go ahead from here and grow the business very fast is what we are planning to do. What has taken us many years to come here, we expect that in the next one or two, three years, we should do multiple times what we have done last year. It is what we are expecting to happen with an order book size, much larger order book size. This is a comfort zone of investing ahead and going to other areas. We have fairly ambitious targets set for ourselves. And I think we are in the right track, going there, and meeting those targets. So with the AI coming in, we are investing a lot in AI, to see that product development and even the process within the organization is modernized and modified, so that their technical sets are much higher. To see that we get products and programs as well as process, to address the large markets and accelerated product development and delivery.

So these are what we are trying to do.

So, size of the market is very large, and we are trying to build products for that. The second question you asked was, it's in the beginning stages, doors are getting sold, we need to get a number of players in the market, so some of them are talking to us. Let us build a few systems and deliver it and look at performance. Then I will be able to answer the question of size of the business. Thank you very much. We are trying to again reuse building blocks, what we have done earlier, the cost of development is brought down, and also with the size and numbers are going to be locked, we need to have infrastructure production, but we are also buttressing the production and calibration infrastructure to start test the market as the contract happens. We believe that contracts will happen in several hundred groups, contracts will happen in the course of this year, but they are not projected as revenue projections. It's not covered in the 20 billion, because these are new things, inquiries have not come, believe it will come, and we should take business, what we think, but anyway, this is the future, so we can't comment much on it, on when exactly it will happen, but we are working towards the product development area, and making us work with this in the end. I don't want to say this because I have no control over the market when it will happen.

We will not talk about it as a person.

It suffice to say that we are nearing us a bump. Products are getting ready. The products are already, some are already, already delivered. Some are getting ready. And to get a substantive scale, we need addressable markets. It's very easy to say, you know, so much of millions of dollars is being spent by two lakh crores is being spent by India on defense. That means I cannot, it's not that I can do two lakh crores with them. It's not going to be possible. We need to have addressable products where, with our technology, we have products and meets requirements. So it gives you a competitive edge, we can convert it. So, I am looking at how to carve out the market, what products are necessary. So, we started a bit back, not that today we are starting this. We started a bit back with the new technologies and applications coming in. We are trying to adapt the competency and knowledge base to address new markets, which we didn't think was possible two years back. So, a lot of things are opening up today. We are very excited today, like the startup, to see that we can develop these products for these markets. But this time is a conscious mind that it's a business, and we need to end, not just make products satisfied, but also make a bottom line business sort of thing. The earlier days of my life, it's only doing the product that's more important than the business. Today I can't say that we are a recent company, we have a board which is more responsible to do that, so we are mindful of all that. We are making very clear plans and decisions. We found that a spark in the scale that has a much, much, much larger revenue and bottom line. The direction is clear. Direction is clear. Commitment is clear. Work diligently and honestly. I don't see why we can't get that contract as we want.

Right, got it. Thank you so much, and all the best, sir. That's it for mine. Thank you.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference through to the management for closing comments. Over to you, sir.

Thank you. Thank you. Thanks, all of you, for joining us in this Q1 conference for Investor Call. I'm very happy to answer any of your questions. What I can say, but I've been more than open with most of my interviews with the other few, which I can answer much more in depth is what I see. The only thing I want to give an impression is that, one, we have done substantively different kind of technologies, multidisciplinary technologies for the last two to three years time. We have developed, delivered a different set of enormous, enormous mechanical capability design, 100% designed by us, more than 100 engineers in mechanical design within the company. We call ourselves the electronics engineering company. So we designed very accurate input positioning, very large platforms, payloads of 120 tons. Movement mechanisms for all of them, all designed by the cooling systems. So many things we've done, which to make the system engineering capability, which are outsourcing everything we've done ourselves here. So building an opportunity model, not just in electronics, but in electromechanics systems and applications. And creating infrastructure in terms of people, capability, as well as production and test infrastructure to see that in other future markets as we go along. All these products you've done has got substantive requirements going ahead in the next two to three years' time. I believe our customers will see us favorably based on the expeditions you've done and the quality and the reliability of the product delivered. I believe that they will come back to us for more such requirements, which is what we're hoping for. And also we're building infrastructure to artists. As soon as it happens, we do that. This is one portion. Second is, we have taken a full investment in radars, electronic workers, and communication systems, which are all maturing, and especially the EW is maturing to a very large stage. We go to qualification and type test. We expect large business to happen after that. As long as we meet customer expectations, we do. We will make a best setup to see that we meet and excel if they have customer expectations. These things are also required for other programs outside India. We will also address those markets as we go along, probably another six months to one year from now. Once the product becomes more visible, we should be able to address the markets. So this is another area where we bring substantive growth. The third area now with AI coming in, we are trying to build a whole lot of products and capabilities. And fine-tune our products technology, increase product capabilities in all these areas, and come out with a whole lot of exciting products in the next one year, one and a half years or so, to address new markets which can be also several thousand crores. So, India is changing, markets are changing worldwide, India is also catching up and changing, Indian entrepreneurs are also ready to get stand-up and rate counted. Skyroot is one such organization.

We did their own launch, which is outstanding.

So we have a lot of companies. We are trying to work with the OVM platform suppliers to see whether the sensors can do together. And so that's another exciting thing which we are trying to do. And we are not waiting for a contract. We are developing products, taking it to trial, go to flight trials, get it ready, so that by the time some contracts happen, they are there. And these are required numbers as you go along.

It was much lower cost of fiber aircraft and this is much lower cost,

and prevent these things that were made available here. So market, the applications are changing, so we want to adapt also to the application with a common scientific basis on what we have done, with all the component availability and new technology coming in the TI community. We want to be abreast of all of them, see that we give world-class products very fast. The third area we would be focusing on is exports. See that we get new opportunities which we never looked at very seriously. Now we are seriously looking at it because people who have come here from both US and Europe and the UK who all found our capabilities good, they found our process very good. So they are inclined to engage us in specific programs. I expect that this will start the next few months and it will expand and if it is one success, we should be able to see several success going ahead. And we also put a team to look at markets to see how we can contribute to faster delivery, faster to our own world-class subsystems and products. And as of when our products become ready, we can also sell it to the Western or the other world to see that we are competitive, reliable, and those products can be done. The idea is to build the filter systems and take it global as soon as possible. But look at the Indian market which is very large, address the market, test it here, take it global, see scale can happen. We are very conscious of what we are doing, very determined to do what we are doing. We are very happy with our shareholders supporting us through all. With this kind of a shareholder support, investor support, we believe the sky is the limit, we can do a whole lot of stuff. There's nothing we can do this much. There's so much of money and so much of capability and infrastructure and development capability and process which we've imbibed making mistakes over so many years. If we can trust on them, build further with the youngsters with a lot of enthusiasm, a lot of passion, we should be able to build larger scale, larger products and take it to work. So this is our dream and we are living our dream right now. We will grow the business very fast is what we believe. Thank you very much. Thank you for listening to me, listening to us, and for many further questions, we would like to Go India, and we would be very pleased to answer all your questions. Thank you once again.

Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.