Cyient DLM Limited (CYIENTDLM) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Science DLM Ltd. Q4 FY26 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, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, non-executive chairman, Cyan DLM Limited. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen. I'm Krishna Bodanapu, non-executive chairman of Cyan DLM. I welcome all of you to our Q4 FY26 earnings call. Joining me today are our managing director and CFO, Mr. Rajendra Velagapudi. Sorry, Managing Director and CEO, Mr. Rajendra Balagapudi, and our CFO, Mr. R.M. Subramaniam. Before we begin, I would like to remind you that certain statements made during this call may be forward-looking in nature and subject to risks and uncertainties. A detailed disclaimer is available in our Investor Update section posted on our website. I'll start by first sharing my perspective on a few key developments in FY26, and more importantly, how we're positioned as we step into FY27. On reflection, FY26 was a four-year on a growth perspective, and I think that is a reality that stares us. Having said that, I'm happy to say, and we will talk about it in more detail, that we end the year strongly with a strong Q4 and a strong backlog and order book that helps us deliver well into the coming years. Let's start with the order book momentum, which remains a strong anchor for our confidence. Over the course of FY26, we witnessed consistent and healthy order intake across our focused industry segments. Each quarter, we had a book-to-build ratio of greater than one, which ends up at being 1.5 times for the full year. The ability to sustain the strong order book through the book-to-bill ratios reflects not just the demand conditions, but also the effectiveness of our customer engagement model, our service offerings, and our focus on long-term programs. I'm happy to say that the order backlog is the highest that it has ever been, which bodes well for the coming year ahead. Equally importantly, or I'd even say more importantly, is the quality of the order book. We are increasingly winning programs that are more complex, more integrated, critical to our customers. Now, these engagements come with longer life cycles, greater collaboration, higher barriers to entry. All of this... This sustains or substantiates the durability of our growth. What this also means, the type of programs that we're working on, means that we will continue to have better predictability and better profitability, which, as you know, is very important to the sustainability of our business or, for that matter, any business. Margins this year at 10-plus percent were very good, and we believe that that will sustain into the future. A key driver behind this momentum has been our focused effort to support and strengthen the sales organization. Over the past year, we've hired some very good sales leaders across geographies and industry verticals, and this enhances both our reach and the depth. This has helped us to progress meaningfully from being just a manufacturing partner to being a value-adding strategic partner. I'll say we continue to hire sales team and good sales leaders, and we continue to see some very good benefit, which will translate into it again the coming year. Being a good value-add strategic partner is relevant in the segments we focused on, where selling is relationship-driven, it is technically intensive, and as you know, it comes with long consultation cycles. With a stronger leadership bench and more structured go-to-market approach, we believe now we're putting into place a sales team that is well-positioned to convert and execute a very, very strong pipeline into FY26 on top of a good year for order intake and a very strong order backlog that we start the year with. Of course, we've had challenges this year. Obviously, the significant geopolitical uncertainties that have characterized this year, initially with the scare with tariffs and with the uncertainty, I would say, with tariffs, and now what continues is the crisis in West Asia. Some of our customers have been directly impacted, and this has led to temporary disruptions in schedules and execution plans in Q4. Of course, there is a stress, and it's hopefully a cyclical stress, in the electronic component availability with what's happening in the memory sector, and we end up, given the complexity of our boards, we end up using memory in a lot of our boards. Also, 60-plus percent of our revenue comes from exports, and therefore, the geopolitics and the global issues have a disproportionate impact on us. Of course, despite these headwinds, we performed strongly. We did well on our delivery commitments. We protected customer confidence, and we responded with agility across supply chain and execution. Another positive we're seeing is the structural shift in the growing traction in the build-to-spec engagements, which are higher-value engagements. Build to print or EMS remains an important part of our portfolio. Customers are increasingly seeking partners who can engage earlier in the value chain, contributing to specifications, manufacturing decisions, suppliers, part selections, and, of course, the entire lifecycle management, which includes things like service, et cetera. These wins reflect the trust customers place in our engineering depth, process, rigor, and governance. On the subject of margins, of course, I'm thrilled with the company's ability to sustain healthy double-digit performance. As you know, this has been our intent and our ambition, and I'm happy to say that this year we ended with 10-plus percent EBITDA margin across the whole portfolio, including the operations in India and the operations in the U.S. This is the first time that we have ended with 10% plus EBITDA margin for the entire year, and we believe that we are in a very sustainable... Of course, this is not by chance. This is through deliberate actions. We're focused on the right segments. We've invested in operational excellence, and, of course, we've maintained discipline and cost in execution. We remain clear that margin sustainability is as important as growth, and our objective is not short-term optimization, but building a robust business model that will deliver long-term value for all our stakeholders. I can again confirm that we continue to invest where it is needed, especially on sales, especially on technology, which will all lead to some very good outcomes over the years. As we look ahead, I am particularly engaged by a strong entry into FY27. The order book, the pipeline maturity, early ramps all gives us measured confidence as we go into the new financial year. Of course, there are global uncertainties, but we are quite confident that structurally we have a very strong business. Obviously, India's growing role in global electronics, increased defense spending, rising electronic content, Thank you. All boards very well for signed DLM and presents meaningful opportunities. Thank you once again, and I will turn it over to Rajendra to talk about the business.

Thank you, Krishna. So, good evening to all of you. I'm Rajendra Velagapudi. Just I'll quickly walk you through some of the areas of the achievements in terms of business. So, first, I would like to talk about, give a concise overview that covers three critical areas. One is the current EMS industry outlook and its primary demand drivers. Notable highlights and milestones recently achieved by sign DLM. And our forward-thinking strategic roadmap organized around the pillars of strengthen, expand, and transform. So to just begin, let us look at the industry perspective. The global EMS market is poised for robust expansion. With projections indicating growth from approximately $650 billion in 2025 to nearly $1.1 trillion by 2033, a solid dagger of 6%. This trajectory is fueled by a confluence of long-term structural trends that is accelerating electronification and digitization across multiple sectors, increasing defense expenditures worldwide. Shifting geopolitical landscapes that prompt supply chain, realignment, and localization, the rapid emergence of AI and supporting infrastructure, and a marked rise in domestic investments within India, particularly in defense and rail. Geographically, the demand is distributed broadly. APEC leads 40%, followed by North America at 35% and Europe at 25%. Segment-wise, consumer and IT remain dominant, trialed by industrial, while automotive, aerospace, and defense, medical, and rail are collectively gaining strategic importance as growth drivers. The key takeaway here is that the EMS industry benefits from enduring multi-year demand, setting the stage for sustained disciplined growth. Shifting focus to the SCION DLM's recent accomplishments, we have made significant strides on multiple fronts. At the Integrated Electronics Manufacturing Interconnection event which was held in the beginning of last quarter, SCION DLM recognized by the Global Electronic Association and also achieved top honors in the fiercely contested Hand Soldering Championship. Where our participants emerged victorious among a field of international competitors. These acclodes underscore our dedication to excellence and are a testament to the ongoing investments we make in quality, training, and process maturity. On the automotive front, we have successfully completed the International Automotive Task Force audit and secured the letter of confirmation. Further, enhancing our credentials. In addition, we have commenced series supply for a new automotive product line and initiated series production for a semiconductor machine supply partner. These are not preliminary trials but full-scale, repeatable production endeavors signaling our growing capabilities and reinforcing our entry into more rigorous customer environments. We continued order intake momentum in Q4, as Krishna said. I am pleased to share that we secured an order intake of over $208 million for the year, resulting in a robust book-to-bill ratio of 1.5x. This performance is a clear testimony to our focused strategy and execution in our key markets. We witnessed good traction across major industries, reinforcing the diversification and resilience of our business model. With the continued strengthening of our sales organization, so we are confident that this momentum will further improve as we move into FI27. So, looking ahead, our strategy is structured into three phases, as I said earlier, to strengthen, expand, and transform. If you look at the Strengthen, our immediate focus is on fortifying our core. This involves deepening our presence in key markets, pursuing operational excellence, and strengthening our build-to-spec capabilities. Tactically, we are enhancing our go-to-market structures, building cross-functional teams, pursuing large deals and new client logos, and investing in automation to support scalable, disciplined growth. If you look at the X-band, The next stage targets selective growth avenues, particularly in automotive, engine defense, and AI infrastructure manufacturing. We are also aiming for vertical integration across cable, sheet metal, and machining, broadening both our market reach and manufacturing depth while capitalizing on global industry tailwinds. If we look at on the transform, Finally, we aim to move beyond conventional EMS models by developing products and platforms, investing in product organization capabilities, and forging technology partnerships and MOUs. This phase is designed to unlock new long-term strategic opportunities and additional growth levers. So, in summary, the EMS industry continues to present a promising landscape. Both started by mega trends like digitalization, increased defense spending, supply chain localization, and the rise of AI infrastructure. Science DLM's recent milestones, particularly in automotive and semiconductor, underscore our momentum. Our phased roadmap, strengthen, expand, transform, charts a clear and disciplined path for growth through the years. And looking ahead for FI27, the company remains focused on operational excellence, margin improvement, and deepening strategic customer relationships, supported by a strong pipeline and order book. And we continue investments in capabilities and go-to-market. So thank you for your continued support and interest in SIGN-DLM. Now I hand it over to RMS CFO.

Thank you, Rajendra. Good evening, ladies and gentlemen. This is R.M. Sibraman. Let me take you through the financial performance of Q4FI26 and the full year performance. For the quarter, revenue stood at Rs. 3,691 million, reflecting a strong growth over previous quarters in the financial year. On a year-on-year basis, it is down by 13.8%, mainly due to the large order closure in Q4FI25. We also observed some moderation in customer offtake due to Aesthesia crisis and project execution facing getting extended. That said, from a demand perspective, we are encouraged by the underlying pipeline and the order inflows. Coming to the order book, we ended the quarter with a strong order book of 24,166 million rupees with INR 672 million net addition during the quarter. The order book. It's highest level in last 10 quarters. It is really encouraging as it gives us a good visibility moving into FI27. EBITDA for the quarter is INR 431 million, down 24.9% year-on-year, and a PAD came in at INR 224 million, a 27.6% decline year-on-year. While the year-on-year comparison reflects the impact of lower revenues and operating leverage, it is important to highlight that the sequential strength and profitability is improving. At a margin level, EBITDA improved to 11.7% and PADs stood at 6.1%. Both EBITDA and PAD margin are the highest compared to all previous quarters of the year, reflecting focused execution on operating efficiency and margin-accredited business mix in Q4. Let me now walk you through our full year financial performance. For FI26, revenue stood at INR 12,615 million, representing a 17% year-on-year decline. The softness is caused by the one large A&D order completion during FI25. This is also an year of moderated demand across certain customer programs and deliberate execution facing. However, the business demonstrated strong operating resilience through the year despite the softness. On the profitability front, normalized EBITDA, after factoring one-offs for wage code impact on MLA expenses, stood at INR 1,302 million, a decline of 10.2% year-on-year, while reported EBITDA stood at INR 1,268 million, down 12.6% year-on-year. Importantly, margins remain stable and double-digit, driven by an improved business mix and tight control over operating expenses. At the bottom line, normalized PAD after factoring earn-out impacts for FI26 was INR 563 million, down 24% year-on-year, largely reflecting operating deal leverage and normalization adjustments. However, reported PAD increased by 7.7% year-on-year to 733 million, with margin improving to 5.8%, up 133 basis points year-on-year. Coming to the order book, we closed the FI26 with a record order book of INR 24,166 million, which is INR 5,105 million higher than last year. This is the highest order book levels for us since two and a half years. This is providing us a strong revenue visibility and a confidence as we enter into FI27. In summary, FI26 was a year of subdued revenue. However, we sustained double-digit EBITDA margins and built a record high order book. These factors underline the robustness of our operating model and position as well for a gradual recovery and profitable growth in the coming year. This slide captures the quarterly trend of revenue and margins. Starting with revenue, we store Steady ramp-up through FI25, peaking in Q3-FI25, followed by a moderation in FI26. Despite the softer revenue environment in FI26, the quarterly trend shows a sequential improvement towards Q4-FI26, reflecting a gradual normalization in customer schedules and improved execution momentum as the year progressed. The margin follows similar trend as revenues with gradual improvement sequentially in FI26. While EBITDA moderate in early part of FI26, we saw a strong recovery in Q4-FI26. Same is the case with PAT as it shows a healthy upward trend. After the start in FI26, software start in FI26, profitably improves sequentially, culminating in INR 224 million in Q4-FI26. To summarize, while revenue trends were subdued, both EBITDA and PAT margins show a clear upward trajectory, particularly in the second of the year. It reinforces our confidence in the structural strength of the business and our ability to convert growth into profitable outcomes as volumes recover. Next slide highlights the quarterly trend of our non-P&L metrics. Starting with the order book, I mentioned earlier that we see a clearer and consistent upward trajectory. The order backlog has increased from about INR 21.3 billion in Q1 FI25 to INR 24.2 billion by Q4 FI26, making it as the strongest level the company has seen for quite some time. Inventory days remain elevated through FI26, largely driven by advanced stocking for the long-lived components and program ramp-ups. Importantly, we are seeing reduction in Q4, reflecting tighter material planning and improved execution alignment. DSO has improved steadily, moving from the low 90s to the mid-70s, driven by stronger collection and billing discipline. DPO on an average is higher in FI26 compared to FI25. During the FI26, we saw elevated working capital, typical of the ramp-up and revenue moderation phase. As we move into Q4 and forward, we are seeing clearer signs of normalization with sharper control on inventory, stable receivables, and a healthier cash conversion cycle. We expect to improve it further as we move into FI27. In terms of revenue share, from an industry perspective, aerospace, industrial, and medical continue to be our largest contributors. Defense share is low and having year-on-year decline of 68% due to large order coming to NNFI 25. The other segment shows stronger growth, largely aided by B2S business. From a product category standpoint, PCBA remains the largest contributor at around 40% of the revenues, reflecting its continuous strength across industry segment. It is also encouraging to see the box bill revenues are going up. Others category record strong growth, supported by B2S and value-added offerings. Geographically, the rest of the world continues to account for 90% of the revenues driven by strong demand across four industries we operate. It is expected to remain the same in the near term. Overall, the Q4 mix reflects a balanced portfolio, increasing contribution from strategic programs and strong overseas demand, which positions us well moving forward. The next slide is a financial detailed overview. This slide provides a detailed P&L view for the quarter. As mentioned earlier, revenue is lower year-on-year due to large order completion in FI25 and moderate offtake from few clients due to West Asia crisis. However, the quality of the revenue is significantly improved along with supply chain efficiencies. As a result, we post a healthy double-digit margins at 11.7%. Although it is lowered by 174 basis points year-on-year, the traction is sustainable and hence provides more confidence moving into FI27. With better control in finance charges and benefits from other income, normalized PAD stands at INR 224 million, a significant growth sequentially but a decline 27.7% year-on-year due to strong Q4 FI25. Next slide. Revenue for the year is INR 12.6 billion, down 17% year-on-year growth, primarily impacted by the completion of a large order in the previous year and delayed ramp-ups in few programs. Material costs are lower year-on-year, mainly due to improved revenue mix. With the revenue contribution from high margin business increasing, we see this trend sustained. The overall margin in FY26 have improved due to business mix and better supply chain efficiencies. Normalized EBITDA stands at 10.3, 77 BIPs higher year-on-year. Reported EBITDA margin also improved to 10.1%, up one or three basis points. At the bottom line, normalized PAD declined to INR 563 million due to operating leverage and one-time cost during the year. However, reported PAD increased by 7.6% to INR 733 million with 5.8% margin at 133 basis points year-on-year. Overall, despite revenue headwinds, FY26 demonstrates margin resilience, discipline, cost management, and improving profitability positioning as well as revenues recover. The slide is on EBITDA and Padwalk. The slide explains the bridge from a reported to normalized margins. The first one-off relates to M&A evaluation expenses, amounting to INR 17.75 million. We incurred the expense to evaluate a deal that did not go through. The second one is the wage impact, totaling to INR 16.4 million, resulting from the new wage code by Government of India. The third item is the reversal of webinars from the earlier M&A deal. All these expenses above are exceptional in nature and not reflective of normal business. The padlock reflects the tax impact of this adjustment as well. The next slide, in terms of IPO proceeds utilization, as of March 2025, we have fully utilized the IPO proceeds in compliance to the objects defined during the IPO. We are glad to report that IPO proceeds are fully utilized and the account stands closed. In summary, FI26 performance, this brings to me towards the end of the finance presentation. Before we move to Q&A, let me summarize the performance in four key points. Order books remain strong with four consecutive quarters of growth in bill-to-book ratio of greater than one. Revenue was impacted by FI25 large order completion, but we are well positioned for a strong FI27 backed by strong order book. Margin remains healthy at double digits with further improvement possible with scale. Fourth, industry and product mix are diversified and moving in the right direction, supporting the long-term margin expansion. With this, I will go into the close. Thank you for your kind attention, and we can move to Q&A from participants.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are required to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Vaibhav Mishra from Finvestor. Please go ahead.

Hello, sir. Good evening. Congratulations for the very strong numbers in respect of margins and very good cash flow and order book and all. But I think, sir, there is a small way to see the YOY revenue. I think in the quarterly call, we were confident of getting our revenue YOY as well. So what could be the reason? I mean, U.S. tariff or West Asia war or any other reason for that?

Yeah, so first of all, thanks for that. It is a question which is very important for everyone. I think the challenge, I mean, the headwind, what we had is, one is the West Asia, war impact, so because of that the materials got delayed, because usually all our materials come through the European, I mean, West Asia, in terms of all the fights and all, so they got delayed, and so we got a very late, we got the materials for the quarter to finish it. And we also had other headwinds in terms of the Israelis, where we are working some of the programs, defense programs. We could not get some of the approvals, clearances, again, because of the Estatia Award, which is going on there. And added to that, and we also have some of the NPI approvals from our customers. So these are the three main reasons where we could not be able to meet our commitment, what we said in the last investor call.

All right. And said, just to, I mean, no, it is not in the presentation. How much exposure we have in this session in terms of our supply chain or delivery? And going ahead, we expected very strong FOI 27. So how is it going to affect our targets or what are the targets that we have set in terms of revenue and margins for FOI 27?

FI 27, I think the revenue, I think we are not giving any of the guidance right now on the revenue side, but we definitely, I mean, whatever FI 26 has gone by, so that is a year which was not a good year for us. I think now FI 27, you will be starting seeing the growth, year over year growth, you will be seeing it in all the quarters, four quarters, which is very strong. I think by looking at the order backlog, what we have, and also the pipeline which we have currently, so it's just a strong reason for us to look for higher growth.

Thank you. Vaibhav, I request you to join back the queue, please, as we have participants waiting for their time.

Thank you. All right. Thank you so much.

Next question is from the line of Samit Sinha from McQuarrie. Please go ahead.

Yes, thank you very much. I have a couple of questions. So, you know, obviously very strong order book growth, that sounds promising, but it's not converting into revenue, and I can understand the reasons you've provided, but can you give us some sense of how do you define order book and backlog, and has that definition stayed consistent over the last few quarters?

Yeah, so when we say order book, so those are the purchase orders which we got from our customers. Okay, only that we will take it where we can take material actions. That's where we will consider the order book. We won't take anything which is a TCV, and all those, we won't take it as a part of our order book. Order book is very clear. It is the purchase orders which are available with us, executable in the financial year or beyond the financial year. So it is a total order book what we have, but for the year FI 27 order book is very, very strong and solid right now. And that's what I think in terms of order book. Order intake is, I think as we say, it is only again. Again, the POs, what we get from our customers, not only we'll take it as an ordinary tech. It is not anything about, this is a full TCB of five years, so we'll get around $40 million, so that we won't take as a part of our ordinary tech.

Yeah, just one question. I think in your slide that you had mentioned, you're still looking for acquisitions. You know, but the IPO proceeds that you've used up about 100%. Any thoughts on what structure are you thinking about as you look to make acquisitions?

Aranathir, let me take that, okay? We continue to look for both organic and organic growth, and as science, DNA, which is, you know, we continue to look at opportunistic one. We will look at both from a product perspective in terms of what we don't have and geographically, okay? And this is our, in terms of the playbook of what we look for. Based on what comes in our market, we continue to evaluate it, and depending on the fitment, we will look at it. We looked at it sometime in the last quarter, but it did not go through. But we continue to look for it opportunistically, and as long as it fits in our portfolio in terms of growth geographically or product-wise, where we don't have that expertise, we will look for that. So it depends on opportunities.

One final question. You identified some new product areas. You spoke about semiconductors. You spoke about AI. It seems like you're getting into more critical product segments. Can you spend a minute talking about what products are you contemplating building there and gives a sense of when we should start to see the results?

Particularly, on the equipment manufacturing for semiconductor equipment manufacturing, so we are doing a lot of the power boxes for the customers, and a lot of those products which goes into the PCPAs, wire harness, and the complete integration of those machinery, the sub-assembly, which goes into the, that is where I think we are focusing today, and we are seeing a lot of traction from the existing customer and also from the new customers in the semiconductor area. So, that's what, and again on the AIS side, as I said, we are expanding. That's where I said we are now focusing more on those areas. So, probably we will explore more on that and probably come back in the next quarter if we have some update on that.

All right. Thank you.

Thank you. We'll take our next question from the line of Disha from Sapphire Capital. Please go ahead. Hello.

Yes, thank you so much for the opportunity. So, sir, you mentioned that some of our revenue was impacted due to the West Asia. Will it be possible for you to quantify the amount that was deferred? And I believe that's the reason our inventory has gone up, because the shipments didn't go through.

Yes, exactly. So, we have already planned for that. That's what the revenue which we have missed there. And that's where I think the inventory which has gone up, the DAO and the absolute value of inventory has gone up. That is one of that reasons because of West Asia. Yes.

So, can you quantify the amount of revenue that we lost out due to this? Will it be possible?

No, I think, yeah, I think, as I said, there are basically three areas where we have just impacted our Q4 revenues. So, I think we don't have, I mean, yes, we have the numbers. Probably, I think, we don't know.

Maybe I can get in here. We don't want to get into exact quantification of this stuff, but if you look at it, some of them are postponed in terms of pushing to the next quarter, etc. But what we can broadly say is these are the reasons why there's been a gap between in terms of what we expected and what happened. But overall, the way we're ending this quarter is based on the order book and what we have on hand. This is the confidence that we should continue to grow quarter on quarter.

Sir, any color on the order pipeline that we have, and what sort of inflows will be expected for FIER 27?

I mean, so we are looking at the order book, I mean, the book-to-build ratio is greater than one, as we said. I mean, we will be focusing on that. I think we are very, very confident by looking at the current order pipeline, what we have. So we will be working towards that, and probably you will be seeing those. Order intakes, for every quarter, you'll be seeing positive things going forward, okay? Yeah, so that's what I think probably I can say on the order intake side, yeah.

Just to maybe one point add to what Rajendra said, it's not from an order intake. It's broadly in the direction of what we want from a sectoral perspective. The non-AND segment is growing, and that's the direction we want to go on. And there are some focus, new areas of what Rajendra talked about. India has a sprinkling of that as well. So, overall, from Directionly, we are happy with the way the audit book is shaping up, and that gives the confidence for going forward.

Okay, all right, all right. And so, what was the contribution from the BTS segment this quarter?

We're not getting into the specifics of section-wise things. I think B2S is a long-term play. Last year, we did not have. This is the first year we are having it. For the first year, it is done well, and this will, in terms of factification to series, order, and volume production, it will have a couple of years down the line is where it will come up. But overall, we are very happy with the way the performance has come up. It's better than our expectations, but we should give that division a little more time in terms of what we do. But otherwise, it continues to be a profitable division.

And we, so this margin of 10 to 11%, we sort of expect that to sustain, right?

Yeah, basically on the margin front, let me try and answer this bit of it. If you look at it, our revenues could have been softer, but we've been able to consistently maintain the margin. It's because based on the quality of the revenue on the order book that we have. Since the color of the order book continues to remain strong and we are happy about it, we can say that we are confident of sustaining it. And if we have the top-up in terms of the growth, the operating leverage impact will start kicking in, and we can have something on top of this. So that's what we are confident about in terms of sustaining and performing better as the volume grows.

And so given the strong order that we have, can we expect some more like 25 to 30% sort of growth for FY27? Would that be a fair assumption?

On revenue guidance, we clear that we will not be giving any guidance on that, but having set that path, what I can say is, you know, Q4 was a good quarter in terms of the growth Q on Q, and also the order book and the visibility of what we have gives us the confidence it will be going to be a strong year, which will make probably everybody happy, but I don't want to be getting into the numbers, and let's leave it at that.

Okay.

All right. Thank you. Next question is from the line of Arithyapal from MSA Capital Partners. Please go ahead.

Hello, I'm Audible.

Can I use your handset mode, please?

Yes, sure. Is it better now?

A little better. Please go ahead.

Yeah, thank you so much for the opportunity. Great performance on the margin front. Sir, I had two questions on Altec and then on the investment that we made on our sales team. So let me start with Altec. Altec historically operates in a much shorter book and ship cycle compared to the 18-24 month gestation that we usually see in our standalone base. So, how do you see this impacting projected 27 consolidated revenue? Because there's enough and more crossfire synergies. So, just if you can highlight between the growth that we're seeing in standalone vis-a-vis Altec.

Yeah, I mean, so Alltech, I think as you rightly said, Amit, we usually get it, the order intake in the same year, most of the things getting converted in that year, almost 50% I can say will get converted. I think we are seeing a good, I mean, we also have a good order backlog right now available, and we also see a lot of pipeline from the existing customers, and also to add to you, I think we also added one of the new customers, the Synergy customer from the sign, DLM standalone side. Now, they also just started working with Altec. We got the first P.O. there in the last quarter. And we'll be seeing more of those tractions happening from the Synergy coming in. And with the order book which we have plus the pipeline which we have, we are very confident that we'll be seeing the growth in Altec measures in F822. Thank you, sir. Thank you, sir.

Understood. So, the growth rate is not, the growth rate that we are seeing in our order book is not explicitly reliant on specific crop sales energies. If it happens, it's an addition. Correct?

Correct. Correct. Correct. Exactly. Yeah.

And on the... Point that you highlighted in your introduction that we've invested in our sales team. So, when I look at the standalone EBITDA margins vis-a-vis the difference between the console and standalone, the EBITDA margins have gone down in Q4, specifically. This is purely because of our investments that we made in Altech, in employee expenses. Correct?

Yeah, let me answer this question. In terms of the average EBITDA margin between India and U.S. business, U.S. business is going to be lower, and that's something which is expected because U.S. manufacturing will have a lower EBITDA margin. So, this is in terms of the expected lines. That's point number one. Point number two, overall, Altec and the growth in Altec continues to have a bit of an overhang with respect to the tariff overhang still continues to be there. You know, there's no clarity in terms of which direction is going, which I think we are all aware of. Overall, the synergy benefits in the cross-pollination, there's a little bit of a slowness in it. Hopefully, things should settle down, and then it will lead to it. And once we have a cross-pollination where Indian customers start going through Altech and the U.S. customers start moving to India, we will see those benefits. Those benefits are just started, you know, on a trial basis happening, but not in a full-fledged. But when that happens... We will have an uptick in the margin, but as of now, none of them is factored in, and as you rightly said, the margins are lower, but that's unexpected. The more we start moving to India and using Altec as the beachhead in terms of U.S. business is where the uptick will come in. But that will take some time, and it also depends clearly on the tariff overhang getting cleared, which should happen over the period of time.

Understood, understood. Just let me squeeze in one more question. So, the question, one is on the current investment that we've made in employee, how much in the sales team, how much sales can they generate, as in what is the revenue potential of the sales team, and then also if you can just help us understand the build-to specification, right? Because last couple of quarters back, the athletic mass manufacturing orders... At least for the four new anti-clients that we had onboarded, we'll start coming in from FI27, Q3, or Q4. And we would see actually scaling up in FI28. Is this still on, or do you see this happening later, earlier than expected? If you can just comment on that.

No, I think as you rightly said, that's what is going to happen. We'll be seeing some uptick in the order intake because of these new people who are on board, and we're also adding a few more people where we are in the process right now. And with all that, we're definitely seeing more order intake in Q3 and Q4 and beyond. Yes, from all these new people coming in.

Understood. And also in the builder specification that you had mentioned last quarter that we onboarded four new clients in the defense vertical.

Exactly. Absolutely. Yeah. You will also be seeing the previous revenues and also the order intakes for the next year. Yes.

So the inflection point will be FAC end of FY27 or we will see the visibility more coming in FY28?

No, it will be on the flag end of FA27 and also in FA28 board, yes.

Perfect, perfect. No, this clears a lot of things. Thank you so much and wishing you and the team all the very best. Thank you. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants, kindly rest your questions to two at a time. You may join back the queue for follow-up questions. We also request participants to keep their questions brief. Thank you. Next question is from the line of Harsh Sheth from PI Square. Please go ahead.

Hi, sir. Good evening. I just want to understand a bit more about the dip and margins that we saw this quarter. I think you answered it previously, but I wanted to get to know more a bit because we moved out of the aerospace, sorry, of the defense orders, which should give us higher margins, but we saw dip there. So can you explain a bit more?

Yeah, from a margin perspective, what I think as we reported, we continue to sustain the double-digit EBITDA margin, which is our focus on, okay? And in terms of the absolute numbers, okay, obviously there's been a drop in terms of the margins, okay? If we're moving forward, as we move along, and if the product mix remains the same, okay, these margins are sustainable in terms of what we're doing.

So, like, could you just go more into the reason for the dip there in the margin, in EBITDA margins?

The EBITDA margins, in terms of overall, if you look at it, it's actually improved, okay, in terms of…

I'm talking about this quarter, to be specific. So, we saw a dip…

Yeah, that's more reflected on the revenue drop and the operating deal leverage impact, because the fixed cost continues to remain the same. That's the impact of it, okay.

So, but shouldn't we have seen better margins from not taking up the orders from the defense space?

Wasn't that the reason that we moved out of the space in the first place? That's what I said. At the percentage, at the absolute level, it has come down, and at the percentage level, it's improved and maintained. And that's what I explained, which is because of the revenue degrowth and operating de-leverage impact.

Okay. Got it. Thank you. Next question is from the line of Shashank Jha from SB Capital. Please go ahead. Hello. Yes, Shashank, please go ahead with your question.

Yes, sir, I have one question, which is regarding the order book. So, when you say book to build order of 1.5, then the order book continues like 400 plus of revenue. So, it seems that we can do 1,600 plus of revenue in FR-27. So, can you confirm something on that?

No, no, I think, see, order book, whatever is there in that, is an executable order book in this financial year, and then, I think, as I said earlier, the order book, whatever we have, is probably 18 months to 22 months, 24 months range, right? So, not that everything can't be happening only in one financial year.

So, can you give us a number, like, I'm asking for some numbers?

That's what I said. We are not giving any guidance right now on that, in terms of how much of the order intake will be converted as a revenue in FY27. So, we are not giving that guidance, but probably you will be seeing that in the next quarter itself, starting from the next quarter itself, we will be seeing that growth.

Okay, and second thing is that like order book pipeline, when you say, so can you give me what, how big is the pipeline, some number, conservative also will be fine.

I mean, are you talking about a sales pipeline, what we have?

Yeah, yeah, Mr. Orderbook pipeline that we are negotiating right now, or we are seeing for next one year.

I think we have a very good order pipeline right now. As I said, it is closer to a half a billion dollar order pipeline which we have today, the sales pipeline, where the teams are working out to make those things as an order intake. So that's where I think the focus is going to be in the FY27 order intake targets which we are driving it internally.

Thank you. Shashank, I request you to join back the queue, please, as we are participants waiting for their turn. Thank you. Next question is from the line of Vipra Ushrivastava from Philip Capital. Please go ahead.

Hi, sir. Good evening. Sir, quickly, one line item on the balance sheet, which is contract assets. Can you please explain what is that?

Contract assets is the unbilled revenue which we have, okay, that's more from the B2S thing, yeah.

Okay, fair enough, sir. And just from a working capital perspective, what kind of targets you have for this journey? Do we see further improvement from here on or you expect to maintain the current level?

Yeah, on networking capital, which we talked about is, you know, slightly elevated. So we definitely see possibilities for improvement and we're going to continue to work on it. Okay. Our target is to reach about 100 to 120 in terms of the number of days, but we have some distance to go. Maintaining what you call a profitable, efficient operations and growing is always a challenge, but we continue to do it and we continue to work on improving it. Okay. It will take a couple of years, but that's a work in progress.

I think the last question from my end, from an aerospace perspective, the company is mainly European defense company as a clientele. Are we targeting new geographies or are we continue to be limited to Europe and Middle East?

Can you repeat the question, please?

Vipro, can you use the headset mode, please?

Well, I wanted to know, sir, from an aerospace perspective, we currently have clients in Middle East and Europe, you know, Israel and maybe Rafael and Tate and all these companies. Do we have plans to switch to other clients also, or we plan to increase our volatility with these clients?

That's what I think earlier RMS also was mentioning, that we will be also focusing more on the non-AND side of the business, so which we will be seeing that, I think, if you look at some of the odd pipeline, what we have, so that's where I think it gives a strong distinct to us, saying that, yes, we will be seeing more of the non-AND, along with the AND growth, whatever we have, the pipeline will be continuing. But yes, not that because of whatever is happening today in West Asia or in other areas, but we see a traction definitely in the non-AND and we will continue that along with the A&D growth.

Right, sir. Thank you.

Thank you. Next question is from the line of Ritvig Agrawal from 3P Investment Manager. Please go ahead.

Hey, hi.

Can you use your handset more, please?

Yeah, is it better?

Yes, please go ahead.

Yeah, so I wanted to ask two questions. One was on the directions on margin in the future years, and on the areas of growth, where do we see growth coming from in terms of revenue and order book? I think we have had some days in the quarter. During the war season, are we seeing any positive commentary from the Israeli defense customers?

I'll take the questions on the margins. Okay, so in terms of the margins, we are confident of sustaining the margins moving forward. This is based on the order book in terms of customers of what we have. With the current mix, we can continue to maintain, and with the growing volumes, there will be a couple of basis points improvements with respect to the operating leverage impact, which is on the positive side. That's what we will continue to aim for in the next year. In terms of the business growth?

Yeah, I mean, as I said, I think, I mean, if I can answer your last point in terms of the defense side of the Israeli business side, I think we will be seeing a lot of attraction there, which we are seeing it right now. There are a lot of RFQs in the pipeline, which we are working out currently, and we'll be seeing more of the order pipeline and the order intake coming from the Israeli customers. And we see the growth not only from that one area, even from existing customers, both in aerospace, non-aerospace, and also the new verticals, the electric vehicles where we are focusing. We are seeing a lot of traction in that one, so we'll be seeing more of the revenues growth coming from those areas too.

Thank you.

Thank you. Our next question is from the line of Deepak from Unify Capital. Please go ahead.

Thanks for the opportunity. So firstly, if you can cover the geopolitical aspect, see US is a big portion of revenues. So with the reduced tariffs, have we seen any pick up in the demand and order? Or the book, that is one. And also, the West Asia crisis, how much, I didn't understand how much proportion of a revenue is coming from the Israeli client. And I'm assuming he would have not given you the delivery timeline yet because nobody knows when the war ends. But on the freight aspect, are you able to reroute from other lines or? Other modes of transport that you're getting the supplies for your raw material that you elaborated. So, on these two fronts, I wanted your clarity.

Okay. So, yeah, sure, definitely, Deepak. On the tariff side, yes, there is... Slightly, I mean, no. There was some clarity, but still the cloud has not gone away. Correct? I think so. We still don't know, but the customers are still waiting. We are seeing. Some opportunities coming right now, asking us for submission of the codes, but it was not that what we were having in the past, but I think probably it will just clear that cloud in probably the next one quarter or so, once we get a full clarity from the US tariffs. Okay, but otherwise, yes, but to your question, yes, we are seeing the new opportunities coming in right now. And the second one on the West Asia, it is not that it is only from one region there where we are not able to make the revenue. Sorry. It is mainly the supply chain where we are getting it through the cargo. I think all that cargo comes either from Dubai or Doha. So, that's where I think we had a lot of challenges in getting the materials. It is not that our final goods are only for the customers there in the UAE region. So, okay, it is not for that. It is basically for all the customers where we have got impacted because of not getting the materials on time.

On this aspect, are you able to fix this issue? Has there been any solution to it that you found which gives you a good visibility going forward? And, yeah, you can answer this, and I have another question.

Yeah, I think, see, we are taking an action wherever we see the impact now. I think that's where our inventory also has gone up. Because of the materials, where we have some partial materials, and we are working out to ensure that we get the materials. And also, as Krishna said, there are also some challenges in terms of the lead times gone up for the memories. So those are the things where we had some impact on inventories. So now if you ask me about some of the actions, we have already ordered the materials for a long, for the entire FI27, particularly for the critical items. Where there are long-lead items, we already placed the orders. So we are ensuring that, so that way at least it will ensure us that we will meet our commitments for FA27.

Thank you.

Sir, one more question I have.

I request you to join back the queue, please, as we have participants waiting for their time. Thank you. Next question is from the line of Praveen Sahai from TL Capital. Please go ahead.

Thank you for the opportunity. Sir, my question related to the order book is first one. Is there any order from the associate companies of the sign you have? And how is the mix of geography in your order book? Because, you know, highlighting the RM delay or the Israel defense orders, these which has impacted your revenue. So, is these orders also in the near terms expected to get a delay in execution?

So, I think to your initial question, first question, so we don't have any intercompany orders, okay, it is all from the customer orders, whatever we have today with us. All order books are from our customers, not from any intercompany, okay, and second thing is, yes, I think in terms of You said about the second question, sorry, what is the other one, second one?

RM delay, RM delay, which has impacted your revenue, and the second is Israel's defense orders. So you have an order book, such kind of order books you have already. So in the near terms, we may see execution challenges of your order book because of these.

Yes, yes, there will be, see, now today what happened, whatever something, whatever revenue we missed in the Q4, now that I just moved into the Q1, some of the revenue has come into the Q1, correct? Where will we be working? So that way you'll be seeing some of the rate shift, and probably once the issues get settled down, probably I think everything will come online, yeah, on track.

And the last question on the margin, that's gross margin. So your gross margin, if I look at on the sequential basis, there is a contraction and that's definitely because of the memory or the RM electronics availability and all. So how you are seeing this gross margin movement in the coming quarters or even 27, considering such kind of a challenge is to continue.

So let me take this question. Gross margin, it's not seen a huge movement. A couple of basis point movement has happened. This is a reflection of product mix in terms of what we manufacture quarter and quarter. It's not going to be uniform right through. That's point number one. And point number two, there are also near-term factors of what the supply chain and the disruption and a few things like that. So, it's a combination of both. Hopefully, our target in the long run is to maintain the EBITDA at the double-digit level and in terms of what we're doing. Okay, that's what we do. There will be a bit of volatility between all of this for the reasons I said, but hopefully, we'll be able to, we've been able to manage and sustain the margin, and that's what we will aim for to do in the long run. Thank you. All the best. Yeah, thank you.

Next question is from the line of Kiran from Table3 Capital. Please go ahead.

Thank you so much for the opportunity. Two-part question. One, other expenses have significantly gone this year, even this quarter, despite the year-on-year, despite the significant drop in revenue, other expenses have gone from 29 crore to 44 crore. Q3 was the same. And this is obviously disturbing our EBITDA emergence quite significantly. So what accounts for these other expense increases despite severe degrowth in revenue?

In terms of other expenses, what you are seeing is a mix of both U.S. and India operations all put together, what you are seeing, that effect. And moving forward, once we see the revenue growth, okay, these are the expenses in terms of, you know, we'll have the operating leverage effect of, you know, it's going to be broadly fixed. So that's how, and we'll keep a tab on in terms of what we do with that.

Sorry, sir, it's not clear at all. I mean, your voice was clear, but your answer is not clear.

What I'm saying is it's the other expense is a mix of both the India and U.S. operations put together, okay, and there are, as we move forward, and when the volume picks up, this item specifically will have, in terms of the fixation nature, so you will have the operating leverage impact, but what you're seeing is the volume as a percentage has gone up. As we move forward, this will be under control.

Got it, got it. Second question is, in Q3, I guess Krishna has just picked about 25% year-on-year growth next year in F27. So if I just do rough numbers, again, I'm not looking for exact numbers, we'll end up at around 16-minute growth revenue next year if we do a 25% growth roughly. And our remaining order book will be 800, and year-on-year, we'll add, like, what, and what, to 500, so 2,000. So are we really, I mean, despite all of the competition increasing their order books at 40%, and similar spaces, right? Defense, aerospace, industrial, medical, quite a few competitors are there. There seems to be some structural – is there a structural issue why we are not able to grow? Altech acquisition didn't go according to plan when I say because you reverse the earnouts, right? So that tells that you do not have according to expectations. We are not growing our order books by 35-40% like the rest of the company who cater to industrial, medical, aerospace, and defense. I'm not even concerned in consumer, right? Is there anything structural that we have seen, a problem within the organization, or is there some industry issue, or is it a vegetation exposure issue? Just not clear around the strategy of what we are saying. I mean, the similar numbers, EBITDA, double-digit EBITDA margin, all that is taken, but there seems to be something missing in the entire JICSA, which we as investors are not able to understand.

I think so. It's a very good question from your side, so I really appreciate that. So if you can look at it, the investments, what we have just made in terms of our team sales teams. So we just started. I think we have a few people on board. As I said, we are still getting some more people in this quarter. So I think those are the things which probably gives us a good order intake and also the new pipelines coming up to us. So, there is no structural challenges, anything, in the organization, because we are running the business since last, I mean, several years. So, we have not seen any of those challenges. So, it is predominantly having the right people there on the ground, I mean, so that we can get the new orders and go to the new customers and acquire them. So, I think, as you said about the growth percentages, I think we will be within the ballpark range here for the next financial year for the FA27. And we are very confident on that one.

Thank you.

Just to add to what Rajendra said, I think we did have a challenge in order intake in FY25, and that's why we had to make some changes in the organization. That has translated to the order increase in FY26. If you look at our order intake increase, I mean, you mentioned competition at 35%, 40%. We are also at that percentage between FY25 and FY26. So, yeah, I mean, extrapolating that, yes, we did have a problem in FY25 in order intake, Which translated to, obviously, the revenue that you're seeing in 26. But the fact that we are at competition, or even, I would argue, higher than competition in 26.

Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. Krishnabodhanapu for closing comments. Over to you, sir.

Thank you very much, and thanks, everybody, for joining today for this investor call. Obviously, we've talked about a lot, but I'll just say thank you for the very insightful questions, and thank you for also giving us some food for thought on where we should be looking at and what we should consider. Like I said, it was a good start to the year, given that we're coming off a very, very strong order book. So I'm confident that we will have a strong FI27. Thank you for your support, and we'll again speak next quarter. Thank you.

Thank you. On behalf of Science DLM Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.