Mold-Tek Technologies Limited (MOLDTECH) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Moltec Technologies Ltd. Q1F527 Earnings Conference Call. As a reminder, all participant lines will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Taparia from MK Global Financial Services Limited. Thank you and over to you, sir.

Good afternoon, everyone. I would like to welcome Mr. Lakshmana Rao, Chairman and Managing Director, and thank him for this opportunity. I shall now hand over the call to him for his opening remarks. Over to you, sir.

Thank you, Raja, MK, for arranging this call. Thank you all for participating in our Q1 performance review. I am very glad to inform you that the company has come out with SLR performance by increasing the revenues, improving the operational efficiencies, and controlling the cost, thereby giving a Almost four times jump over the Q4 profitability, and 12 times compared to the Q1 last year. And this is another very important point to note here is, this is, without Beryl really contributing anything to the bottom line, maybe on the top line there was some addition, but the process of integration has started because the design team has to be created in India. That is what we are doing in the last six, seven months, and now the design team is able to contribute, started executing projects for Florida clients, and that will become... Positive from maybe Q3 onwards. Q2, Q3 will be timeframes when Barry will start contributing to the bottom line also. So I think the future is going to be bright for the company with more automation being used to enhance the productivity. Thereby reducing the employee costs or increasing the per-employee revenues. Either way, it is beneficial to the company. And another positive note is in MES. Power and distribution, due to the data centers happening all over the world, there's a lot of demand for power transmission, distribution work, and there we are getting, we got into a contract with the number one power distribution company in USA, and the team is being formed for them. About 10 people have already started working, and the team may grow up to 20, 30 people center for that company in the coming months. So, in all areas, there is a significant increase in the demand for our services, and I hope the future will be much brighter. We can share more information through questions and answers. Over to the operator, please.

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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kiran Gaj from Knightstone Capital Management, LLP. Please go ahead.

Hi, good afternoon, and congratulations on good set of numbers.

I have two questions. What is your work on the end for MES?

The MES work-on-end is just like last year, it's about 0.15 million, whereas the civil work-on-end is 4.4 million as against 2.7 last year. So, civil continues to have strong traction on demand.

Okay. And does the incremental annual revenue of 2 million for burial includes the 1 million purchase order from Hillsborough County?

Yes. That is where we anticipate going forward in the next 12 months, their revenue rate will increase because of this mass purchase order they received from that county. And also they are entering into Georgia now because earlier they restricted themselves to only Florida. Now, with our Atlanta office is being in Georgia, we have initiated the registration in Georgia also. So, thereby, they will be able to get the inspection and permits work from Georgia also. So, this is the second step we have taken, and the team creation here also has come to eight members now. Now, that team has to grow up to another 15 to 20 people by at least October, November, and then most of the design work can be handled from India. We can see the revenue improvement, I mean profitability improvement from Q3. Hello. Hello.

Mr. Kiran, can you hear me?

Yeah, yeah.

Sorry. And what was the EBITDA for Beryl in Q1?

Beryl is just around breakeven now, so EBITDA margin, we have to, for Beryl, I'll let you know later. We'll work out.

Okay. Thank you. And all the best.

Thank you. Thank you. The next question is from the line of Tuneet from SJ Investments. Please go ahead.

Hi, sir. Thank you for the opportunity. I'm Sankajee. So, I wanted to start with one of the remarks. You mentioned that we have reduced all our other expenses costs. As a result, we are able to grow profitable. Could you give some insight into what costs did we reduce and how many of them are sustainable?

Yeah. As I mentioned in the previous quarters, we have taken a call on MES division downsizing of the automobile. That is one of the major reasons for the reduction in employee costs and also other expenses, like the very expensive software costs. And other costs have been now reduced in MES. So, that is one of the reasons why the other expenses dropped. And there were some MTM losses last quarter. This quarter, there was no loss. So, that is another reason for the reduction in the other expenses.

Understood, sir. And you also mentioned a long, large pipeline as a result of data center build-out. So, are the orders already in place for other design firms? Or do we expect the next one year to also get more orders in this space? Because there's a lot of capex that already has been done in the country. So, I'm wondering how much more capex is going to be there.

No, I'm talking about power distribution for the data centers is happening across USA. So there will be huge investments on power poles, laying of lines, distribution, transformers, and substations. So, where we are the expertise. For the last seven, eight years, we have a team of about 50, 60 people. We are doubling that team now. In the last couple of months, we are aggressively shifting some of our automobile people into... Pulse and Towers design, also substation design. So all these changes are going to contribute in the coming quarters. Already some changes have been done in the last two quarters, and some more teams are being added for a couple of big distribution companies in USA.

And could you also give, you mentioned that Beryl is expanding to other counties. So could you explain, you know, at least I think they had U.S. officers also, right? So how are they exactly helping with Beryl or are we mixing the offices together and employees together? How is it working there?

No, Beryl has limited its operations to only Florida all these years. They've never gone beyond Florida. Now, we introduce them in Georgia, in Atlanta City, and they have already introduced and getting their name listed as an approved engineering service provider for the county. So that will start giving them work because any citizen anywhere in that particular county or state can approach burial for various works they require for the residential buildings, additions, annexures, air permits, insurance claims. Anything to do with their residences, they can make use of. There is also one of the listed entities. So, it is listed only in Florida. Now, it is recently getting listed in Georgia. So, one more state work also can start coming in. Probably, it will start as a trickle now, but it will pick up speed by end of this year. So, their number of contracts they received now can double, instead of from one state, they can get from other states. So, these benefits will accrue in the coming quarters, maybe from the...

And what kind of growth do you expect from these other states? Because you might have some assumption that that's how you're building the team, right? So what kind of expectation?

Yes, we are assuming that till Q2, it may break even in Q2, Beryl may break even in Q2, and from Q3 and Q4 onwards, the numbers should be positive quarter on quarter. So hopefully, if not this year, next financial year, Beryl will be in a position to add at least 0.5 to 0.75 million dollars to the bottom line.

And in terms of onboarding more professional engineers, where are we at today? Because we had plans of expanding the number of people we have in PEs, right? So where are we?

Yeah, we have only a couple of PEs as of now on our board, who are US-certified PEs. And we are now in talks. To acquire another structural engineering company with mainly PE's on board, because Beryl is more into residential, permitting and government work. It is not much into design. So a good design company can make this total team well integrated, because today Moltec is... Very strong in detailing and connection design. Beril is very strong in government permits and residential work, but not in design. So we are now talking to a design firm which has both structural steel and residential background with about 7-8 PEs. And if the deal gets through, this combination can be really what makes us a complete civil engineering service provider.

But what is the size of the probably, for me to be acquiring, in terms of revenue and the cost price?

Yeah, we are discussing with them. Today it may be too early to give the details, please.

But have you seen any inflationary prices, because if the capex started, they also must be getting more work. Are you noticing any people asking for higher premiums in the UST in the last few months?

You mean asking for higher premiums?

Not really.

Not really. It is similar. There is not much change in the valuations.

And one more question regarding MES, just to understand the trajectory of what happened over the last few years. Because in your website, you mentioned that in 2022 or 2023, we finally reached probability in MES, the mechanical division. So, till then, were we accruing any losses in this division in 2023?

Yeah, in the last couple of years, MES has been bleeding, especially last financial year, MES workforce flow is very low. It's almost 7-8 crores overall loss in MES last year, because we are holding the people and software, hoping that the EV market will revive. But there seems to be no real turnaround for EV market as of today. So instead of keeping those people idle, we are shifting some of them into poles and towers design, substation design, and some people we let go. So the expensive software for automobile, those costs have come down, and some of the expensive resources who are only suitable for automobile design, I mean EV robotic design, they have been let go. So these are the drains. It was happening last two years, especially last year. The workflow in EV section was very low. So, starting this year, we have started with a thin, small team. We want to continue in EV because once it comes back, maybe after two, three years, we should not be lagging in knowledge. So, we have kept a team of 50, 60 people who are relatively busy now. But the team was 125, 130 people a year ago. So, at that time, they were mostly idling. Some people were shifted to electrical poles and towers, and some people were let go. So now the team is 50 and reasonably occupied.

Okay, sir. So usually, sir, when do these people give you orders? Is it usually in the erection phase of the plant? Or is it time to time after erection also you guys get orders in terms of design? Just trying to understand the life cycle of design while you are doing this mechanical division. Could you explain that?

In mechanical, see what now currently majority of our mechanical work is coming from poles and towers and substations. Right when they start laying of the line, they decide the route. Then they start using our services until the lines are laid. If it's a substation, they give the substation locations, and then we design the structural frames, structural dimensions, and detailed drawings to them. So the process will go on from the beginning of the project execution till the end. We'll be working with them. The initial contact will be after the design is completed. Generally, some part of the design they let Indian teams do. The basic design is generally done based on site conditions. Hence, the design team in America will be doing this base design. Then, detailed design and detailing will be done from India.

Of course, the American team is also, but our team is based in the U.S. It's not someone else's subcontractor.

Not really our team. We don't have a team in mechanical design there. We have a team in structural side. We don't have a team in mechanical design. Today, mechanical design or even structural design-based design is not done by us. That is why we are still looking for a structural designing company acquisition. Once we make that acquisition, then the team in U.S. itself will be able to take right from the general contractor the work rather than taking the work from the directors and fabricators. Today, our main clients are still directors and fabricators. The real general contractor is where we have to target. There, we require structural designing capabilities. We have the capabilities, but we need a bigger team in the U.S., which can bring the general contractors into the future, and then that work can be outsourced from India. So that benefit is yet to accrue, but our next step will be in that direction.

Sorry to interrupt you, Mr. Praneet. I would request you to rejoin the queue for a follow-up question. The next question is from the line of Dhruv Bajaj from Growth Spear Ventures. Please go ahead.

Sir, thank you so much for giving me this opportunity. Sir, firstly, we did mention in our previous quarter regarding his master service agreement, wherein we would be working with his power plant player. So, has that execution started from this particular quarter? We had some master service arrangement with a client in USA for the next 2-3 years.

Yeah, that is where we started. We started with a team of 10 people now, 5 people are already being billed from July, and from August, September 10, and by October, November, 20 people will be working. That is the outcome of that agreement.

Okay. How big can this be on an annualized basis?

At this stage for the next 12 months, that is starting, let's say, from August, it can be a million dollar per annum activity with very good margins. And with them taking us into other lines of activity, it can even go in the coming years. Currently, you can factor about a million dollars from this contract.

Fair enough, sir. And, sir, like you did mention, because of this data center implementation, there is a lot of requirement of this power transmission and power generation projects. So, that we are working already on the US. I think this particular order was on that strategy. But, incrementally, what type of demand scenario are you seeing on that strategy? Because, based on our understanding, the bottleneck is used on that side. So that should give you multi-visibility. Can that be a problem in this video?

The opportunity is big. I wouldn't say it is a $100 million opportunity. It can be together, all together, it can be almost $8 to $10 million opportunity for our part of the business. But finding people and training people in that line is becoming challenging. We have just now started a team for this new client and created the content, created the videos so that our engineers can be trained in the American way of electrical design. So the electrical line distribution design. So that work will initiate us to ramp up a little faster in future. But I wouldn't call this line a $100 million opportunity. It will still be $5 to $10 million per annum opportunity, but with a good profit margin.

Fair enough, sir. And sir, in this particular quarter, we surprised, I think, everyone in terms of the margins that we clocked in of 19%, whereas we guided, I think, in the previous call that we will be achieving somewhere around 15%. So just trying to understand that I do understand there are very decent restructuring exercises which ultimately led to higher margins, but is there some sort of seniority involved here considering Q1 is generally one of our better quarters, or is there some product or service exchange which is leading to such higher margins versus what we guided?

So if you can help us understand the sustainability of that question. Yeah, yeah. Actually, Q1 was, last Q1 was not so good. Actually, we had 78 lakhs profit and a very low EBITDA. So, that way, there is nothing called seasonality. The real seasonality comes in terms of workflow. You always, like in packaging, we talk about EBITDA per kg, but here in technologies, what I would look at is, what is the work on hand at the end of the quarter? Today it is 4.5 million in civil, as again as 3.7 last year. So we are confident that the next quarter also is going to be good. The work on hand is a very important measure for us, because if the project flow is coming down, even if you have the team, like in EV case, that's what happened. In the EV, we have created a big team of 150, 130 people, but the workflow used to be 100k, 50k per month, and the accumulated work at any given time was less than a quarter million. So that is not a good indicator. Here in the civil now, we have $4.5 million work on hand as of today. That's a good indicator for me to see the next quarter also with a positive optimism. And one more thing that adds to my optimism is Beryl, which has not contributed in this quarter, rather small losses, would definitely become break-even in this Q2. And from Q3, it will start contributing because our design team will be ready.

Makes sense.

Is it fair to say that we only guided for some 250 voters kind of run dates for FY27, and given the volumes of order that we are receiving at the moment, is it fair to think that we will definitely achieve on that front? I think we already achieved what?

Yeah, 240-250 is possible, because we have done around 61 crores now, and I think this trend in the Q2 also gives me confidence. Similar level of achievement is possible going forward.

And, sir, on the margin plan, do we want to revise as guidance on the earlier 15% level, or will we stand with that level and hopefully over-deliver? What's your take on that plan?

I think the trend was, the way it's going on, the EBITDA margins can even reach at least 20%, if not 23% what we achieved in the current quarter. So, last year it was around 16%,

EBITDA.

So, it should at least cross 2023 level. Sorry, last year it was 11%. So, it should reach at least 20 plus.

Sir, historically, we have always done, I think, 20-25% kind of EBITDA, but due to the harsh struggles in certain segments, we were earlier having all these issues. But now, directionally speaking, sir, how confident are you about this business? Because, like, even in your voice, we could see a lot of optimism versus the previous quarter's concours. So what are you seeing on the ground that gives you so much confidence?

Yeah, two things. One is the workflow is increasing. The projects are taking off more and more in civil. And second thing is Beryl is going to start contributing from next quarter, at least two to three onwards. It will certainly start positive contribution. And the third thing is our power and transmission line business is increasing with a strong leader giving us that MSA and work started for them. So this will be a very good referral point for us to showcase our abilities in the U.S. for the other clients also. So with all this Jusme conference and our new productivity drive through automation is improving the output per person. So without increasing our employee costs, I mean proportionately with a less increase in the employee costs, revenue growth can be better, higher. So that is what gives me a confidence on the overall performance.

This is just one last question from our high end. Sir, we did mention in one of our previous calls that in Beryl, I think the commercial promoters are also supposed to subscribe some warrants in the business, but due to fall in the share price, they couldn't. So, will the incremental infusion is planned on that trend from their end?

See, it was part of the understanding MOU at the time of the acquisition within a time frame of six months. So the six-month time lapped in April. At that time, the six-month average price was coming much higher than the current market price. It is normal for any human being to think, why should I buy a 30% higher price when the share price is 130? He was offered at 165, I think, according to the six-month average. So, he didn't show interest and we didn't press up on it. So everybody has to make their own investment decisions. We can't push people to, you know, their own money. They cannot.

And there won't be any incremental excuses on their end. I was just trying to get on that because the six-month period has already lapsed, as you are saying.

Yeah, in the six months, they have just a small negative. For the eight months, what they concluded, some $5,000, $6,000 loss in the eight months, which is not a big deal. And you can expect that while integration is taking place between an Indian and American company, there will be some people who leave the company, and that skill set has to be created. So that challenges have been now overcome, and the team is slowly gathering pace, and the communication between Indian team and their American counterparts is pretty good. We just lost two out of the 38 people when we acquired. Those two both belong to design, unfortunately. So that is what has given a little setback to them. But these six-people team in design, what we created now, are catching up with the domain knowledge. So now I think going forward, our support to Beryl in design will be... Strong enough for them to go aggressively in the market.

Mr. Dhruv, I would request you to rejoin the queue for a follow-up question. The next question is on the line of Kostav Babna from Kamana Holding. Please go ahead.

Yeah, hi. Thank you for taking my question. So, you know, in your press release, you have, in the growth opportunities in the civil and structural division business, you said rising investment in data centers, right? So I want to understand... Right now, I don't think the company is doing much in data centers in the civil and structural division. Is there any plans over the next one, two years to enter the space and how in the civil and structural division? That's the first question.

No, we are already doing, done a couple of data center structural work in the last one, one and a half year, and now with that background and showcasing that, our team is aggressively marketing for more and more data center structural work. We have already done a couple of them.

So, with this new acquisition that you're talking about, which you're planning to do now, or to add design capabilities, will your value proposition...

Not only for data centers, any project, any commercial or residential building. When one company is giving both structural design, detailing, correction design, and the whole thing, including permits and all, obviously you can charge, not hourly rates, you can charge a percentage of the project cost. Which we can't do, and we are doing in bits and pieces. So once we have a structural designing company in hand, which is an American company representing by American PEs, and then we talk the fee and the cost of the project. Let's say the cost of the project is 100 million. Probably we can charge 3 to 5 percent for the entire structural design, correction design, drafting. Maybe architectural will be left over. So probably together, structural and architectural, the general fees are 3% to 5%. So at least 2% to 3% can be charged as a project cost, on the project cost, which we can do only if we have a strong design team representing the whole company.

Fair enough. And you had said earlier on the power side of the business, The opportunity size is 5 to 10 million. So, is there opportunity size, the sector opportunity size, or the opportunity size of this company?

No, no, no. Sector is much more than 200-300 million. What we can deliver in that is what I am saying 10 million. So, the sector is more than half a billion, maybe. So, you can deliver 10 million? More than half a billion. But majority of that main design is done in America. So, substation, part design, and detailing is what outsourced. So, out of 0.5 billion or even 1 billion, maybe 100 million dollars may go out of America for substation design and detailing. In that, I am hoping 5 to 10 million for a mobile tech.

So, sir, let's say we had 10 million, if you're hoping for 10 million, let's say, where are we right now? What's the revenues right now from that business? I mean, we can get to 10 million, but where are we right now?

Right now, probably we are around 1.2. How much is our poll center was? This is one and a half, and this is about 500. So, about 2 million now.

So, you're saying it can become 5x in about 3 years?

Ah, yeah. It can at least 3 to 4, 5x in next 2-3 years.

And you're saying this is a high margin business?

It is a high margin.

Okay, sir. Best of luck. I hope you continue to, you know, give this good performance with higher margins, and I hope the performance isn't volatile like how it used to be. Best of luck for this team, sir. Thank you. Thank you, Vishal.

Thank you. The next question is on the line of Manish from Swastic Investments. Please go ahead.

Yeah. Thank you for the opportunity, and congratulations on the very good set of numbers, sir. Sir, I had a question. One... Will you increase employees in your design team in U.S. since you've said they've expanded to one more state or home, which is Georgia?

There is no need. The design team is being created in India. One or two people there is good enough to take care. One PE is going from India to settle down in Florida from October onwards, maybe October, November, once he gets his L1 visa. So, that will be enough with the current another three-member, four-member design team available in Beryl. They will be able to do the front-ending, and the back-end team, what I said now, six to eight people here, will be ramped up to 15, 20 people as the growth comes in. So, there will not be any much addition of American staff in... In this domain.

Okay. I ask a question. Yes, go ahead.

No, even if we go with the structural designing company, which we are in talks with, we will be expanding the team here in India, not in the U.S.

Yeah, I understand that, but the acquisition that you've been talking about, I know we've been talking about it since long, and fortunately, Beryl happened. But Beryl, like you highlighted sometime back, has not given us the end-to-end expertise, right? Maybe in the residential segment, yes, but there are a few open gaps which maybe one other acquisition can add. Now, my question was more in the context that you highlighted in the previous call that there are so many counties in the U.S., and the opportunity to expand to those counties is definitely there. So, because you also highlighted that you guys have expanded into Georgia this quarter, so that was the reason why I was asking if it makes sense that we increase the design team in the U.S. so that we can expand to maybe more counties or maybe take more work coming our way.

No, I understood your question now. See, if we expand Beryl's operations further beyond Georgia, yes, we'll be needing people there. But currently, this is the first step we have taken to start in Georgia because of our office is there in Atlanta to coordinate and make it easier for Beryl to communicate and take up the work of Atlanta County jobs. So once we see merit in that, we will certainly go aggressively across some more states, and then we need to add people, because the work, what they do is more permits and inspections, which require a physical presence. So, design work can be done from anywhere. So, there will be a need for increasing the team there only when we move to other states. In Atlanta, currently, we have a staff of five, six people who can help Beryl in executing the work once it starts from the Atlanta county. But I am not looking at that as a permanent immediate goal because immediate goal is to set the Beryl's design team in place and start executing the Beryl's design work which we are losing now. So that is a step one. And step two is Georgia County addition to Beryl's operations where our current office people will be enough to take care. And once this success comes in, probably it will at least take a year to see some good traction in a new county. And then probably we will be looking at expanding the team there also.

Thank you, sir. That answers my question, and best of luck for the subsequent photos.

Thank you.

Thank you. The next question is in the line of Preach Shah from Blue Star Capital. Please go ahead.

Am I audible, sir? Yeah. First of all, congratulations for a good set of numbers. Sir, as I am new to your company, sir, I just want to understand what was the reason for big jump in the margins, and are these margins sustainable? So, would you please help me with that?

Yeah, I was telling the same thing. Two things have helped us to improve the margins and will continue to improve. One is our reduction in non-performing division of automobile engineering, which we have reduced the manpower and saved the cost. But more than that, the what real contributor is high automation, what we brought in in our operations, and an incentive system which is driving the people towards higher productivity is visible in the last, at least last three to five months. So these two are going to be a long term in nature. They're not one time. What is the point of indicator of the growth is work on hand at any given time. That looks very solid now, around $400 million, as against $3.5 million last year at the same time. So, it indicates that things are positive in the project flow. And now, execution costs are now brought under control, and they will be under control in future also. So, what is going to further improve is, burial, which is not contributing to the bottom line, will start breaking even in Q2 and might start making profits from Q3. So, that is why we are confident that the margins are sustainable going forward.

Good morning, sir. Sir, as you have given the guidance for FY27, any sort of guidance for FY28, what you are looking for, a ballpark figure would be also helpful?

Yes, I think we should at least do in the same way for the next four quarters is the minimum what I expect.

No, Namusha. For FI27, you have said 240 to 250. For FI28, for next year, what are you expecting?

Oh, next, 27, 28. See, our numbers are dynamic because one thing is sure, we are on a strong wicket of civil engineering and not so strong in MES. And in MES, now we found a very good footing in the electrical distribution. Substation work, which is becoming our forte, and automobile is there, but it's not a great reliable line for the last several years. It's been going up and down, which has now narrowed to a small team. So, going forward, the... I would say wavering in the performance won't be there, I hope, as long as the civil work on hand is strong. And going forward, we'll be making definitely acquisition in the structural engineering side, which can add numbers beyond annual growth. So I can't predict next year, probably at least 300, 350 crore should be our target for the FI28, along with an acquisition.

Thank you, sir, and all the best. Thank you.

Thank you. The next question is in the line of Praneet from SJ Investments. Please go ahead.

Hi, sir. Thank you for the follow-up. So, I wanted to understand, you mentioned the $4.5 million of working hand rates, sir. How much was it a contribution because of burial? Was this a regular course of business in terms of order book?

No, in this, we have not added burial number at all. This is a Maltec INC. Work on hand. Okay.

So, Beryl, does it have a work on hand basis, or is it usually how it goes every month, it just changes?

Their work on hand is typically small in nature, because their work is more of residential in client, so each may be $10,000, $5,000 projects, or maybe $20,000. Whereas in Maltec INC, where we do structural steel buildings, there the project sizes are anywhere from $20,000 to $500,000 each. So, our work on hand is more of a measure for our future, but whereas burials work on hand is immaterial, they keep getting daily orders or weekly orders, which are completed within a week or ten days, whereas our projects last for six months to one year, or at least three months to one year. So, for us, work on hand is an important measure. For Beryl, being a retail kind of work,

that's not a big deal.

So, we don't really monitor that.

So, is this the highest work on hand we ever had since the company's inception, or how was it in terms of the size of work on hand?

Does work on hand mean this is the number of projects awarded to us which are to be executed? One good thing in the case of burial that happened recently is that they received a $1 million work master purchase order from the county, which is going to help them to have a steady flow of work from the county. So that was not there three months ago. They got it just last month. That is, apart from the regular day-to-day orders they receive from the residencies and individuals.

Understood, sir. So, one more thing I wanted to understand in terms of FAT, Madhika, you mentioned that a lot of efficiencies that are usually sticking in in terms of reducing costs and all of it. And you also mentioned the productivity, efficiency in terms of labour utilization. So, do you think the margin of FAT can go above the 15% mark in the next 1-2 years or do you think that will still remain the highest level we are probably able to do?

I'll be glad to maintain that it's at 15, but it can move up once barrels start contributing a little bit. So, for the time being, we can keep 15-16% pat margin as a target.

But, sir, is it possible for us to go beyond 20% because a standalone business is at that level anyway? So, is it possible in terms of consolidatedly it moving to 20%? If the profit margins, they are a little lower compared to our standard Indian business.

Yeah, Beryl cannot have 20% fat margin. Probably they will at the most reach 10%. But our standalone can reach that. So let's see how it goes.

Got it, sir. So, sir, one more thing in terms of just understanding our past. So, you mentioned that mechanical, it's been late for the last 10 years, right, sir? So, how many of them were profit-making, was non-profit-making for mechanical division over the last decade?

There were two, three years of profitability, 22 and 23, I think, 22, 23, and 23, 24 to some extent. Only two, three years it was profit-making, MES. But for that almost remaining five, six years, the team was not fully uniformly loaded. There were projects for three months and no projects at all for the next three months. That kind of uncertainty was there in our particular domain for quite some time. So that's why the call has been taken to come out of that and keep only a team of 45-50 people who are getting regular work. And the redundancy has been removed.

Understood, sir. Sir, in terms of the work-on, did we add new customers also? Did more work from our existing customers itself?

No, no, both ways. We are getting more work from the existing clients, and then also new clients are being added. Now, Veril's BD team is also going to work for our regular core business. They have been trained how to handle the business development for our structural designing and structural detailing operations. So, one person from Atlanta went and spent a month training them, and their contributions also will start coming from maybe next couple of quarters. So, we are making sure that their American presence and their contacts are also can be used for our core business. So, that is another delta that can happen from Q3. They have started now, but for them to get used to the language and... You know, properly give a presentation. It might take a couple of months, but once they do it, they can be much better because an American engineer talking about Moltec will convince the contractors and fabricators to give the work to us. So that can help our core business also. That also we initiated now.

So basically we are training the sales people already there for better to sell our products also.

Yeah, there are already three-member team. A strong team is there, and they are engineers, and they can easily catch up. They are doing work for the residences and government projects, so they have to twist the story, and they have to catch the way of presentation of our services. That may be a couple of months it will take, and then they can also contribute towards our core business.

Sir, and one more thing in regards to our structuralism firm acquisitions. So, when do you think we can close by? Because I think in the past we got some delays because we're not able to identify the right company. So, just wondering when do you think.

I think again now also if I give a date and it will change, it will not look good. But there is a close proximity. If it happens, it can happen within this calendar year. So, let's see.

But there are options.

I'm coming to September end. I'm going to meet them in September end. Meanwhile, Prasad, who is here now currently in India, is going back, CEO, back to US on 16th August. So from then, he will be interacting with them. And I'm going there in the second half of September. And if things go well, we may either take the deal or drop the deal in October. So it can happen in this year.

Got it, sir. But can we not build our own PE? Because we already had that.

No, no, no. Building up a PE team in US is next to impossible. Finding PEs who are willing to come and work to an Indian company and with a reputed 10-20 years of experience is very, very difficult. We can find one or two people, but not a team. So, this one, what we are looking at is a team of about 15 engineers. Half of them are PEs and SEs. So, that kind of company with more than 20 years of existence. So they will have very deep-rooted contacts and many projects to showcase, which you can't get by yourself. It will take another 10 years. So we want to buy the time.

So, but are there options, these kind of fits, are there options to begin with because it seems like not that many companies will be available. So, if this doesn't work out, do we have options or we need to end up waiting for a while after?

There are always options, but the time, you know, you will keep losing time. So, let's keep that as an additional bonus if it happens. I'm not concluding that it's already done. It has to happen. We have to find the correct fit. People who are willing to stay with us, people who have a similar mindset, all that need to be discussed. That's why these acquisitions, though small, take a long time. But there is a good probability. Let's see.

Got it, sir. So in terms of number of PE's, sir, how many do you think there will be in the U.S. combined? Because you're telling it's impossible to build probably at least by yourself. Do you think, how many are the numbers to begin with in the U.S. in terms of PE's are certified?

You mean in the entire USA?

Yes, sir, like the supply-wise. Is it going to be a mortgage or what are the numbers exactly, just to understand the market?

There may be thousands of fees across the USA for structural design. Otherwise, you know, so many structures cannot be designed and stamped. There will be thousands of them, but many of them are... Huge companies, construction companies, or very few of them practice. It's like our CA and CPS. Many CAs work and very few CAs start practice. So like that, many PEs work in companies, very few PEs start practicing. And even if they practice, if they have only two, three people PE team, they can't execute big projects. So we have to look at a team which is minimum five to ten PEs. So this is where it will be difficult. In small towns, you will find three or four people, two PEs and five, six engineers, forming and doing their own work and making their own money and be happy with it. But there are firms which have about five to ten PEs and about another five to ten engineers, a 20-member team. That is what can add value to a company like us. A small group is, again, not so much valuable. We are looking at a sweet spot of 10 to 20 employees, half of them PEs, the guidance. So that is what we are now talking about. So let us see how it happens.

Thank you very much, everyone.

Thank you. The next question is from the line of Bharat Sharma from Three Sigma Asset Managers, LLP. Please go ahead.

Thank you for taking my question, sir, and hearty congratulations on a good set of numbers. I just wanted to understand your, say, long-term vision. Where do you see your company next, say, next 10 years? And also wanted to understand that you have been doing so much good work in U.S. Similar kind of, I would say, developments are happening in Indian markets. So what's your plan for domestic cases? Thank you.

First, let me answer your second part. As of today, India markets and their rates are very, very low compared to what we can get from USA, so we are not aiming at Indian work. Unless it is something exotic and needs a good value addition. Coming to your first question, 10 years may be too long a period to envisage, but in the next five years, I see that our company becoming a complete civil engineering, of course, mechanical also will be there, but major more as a...

I just wanted to understand in terms of your, maybe, aspirations, in terms of how big the company you want to see yourself in five years, from current, say. Yeah, yeah.

That's what I'm answering. We want to see that we are a complete total solution provider for civil projects, either commercial or residential, government, or funded, or, you know, either ways. And I wish, because you are saying five years, not only structural engineering, we also want to have architectural services also in our gamut. Going forward, so that right from project inception, Till the end, our services are required for a general contractor or a builder. So, adding architectural will be my next lookout. Once the structural engineering has been acquired, the next step what we require is to become an architectural service provider also. So that also we want to through acquisition only because, again, that also calls for reputation, deep experience in American ways of designing architectural design. Because you are giving me five years of time, my aspiration is to have even an architectural form under our wings, so that A to Z, for both residential, commercial, or even industrial, will be in a position to provide and work not only on hourly dates, but on percentage of the project costs. That's what is my aspiration.

Thank you. Sir, I also wanted to understand that your, I'll say, gauge of the capabilities or design capabilities of people who are available in U.S. versus India, and are you going to primarily expand the U.S. piece for sales purpose, or you plan to, you, there is a differentiated engineering design ability, I'll say, capabilities also, which are there in U.S., which are not there in Indian students?

See, what I am looking through acquisition is their contacts with the general contractors and the local presence and proven track record. That is time-consuming. To achieve that by an Indian firm, we have to set up an office, start practicing. Over a period of 5-10 years, we execute some projects, and then your name will be heard around. So the shorter way of doing this is acquiring a firm which has done it before. So if the company is there for 15-20 years, they would have spread their wings across the state at least. So that entire state knows some of the unique projects designed by an architect or a design engineer, and that preference gives a long way in getting new projects. It's like a doctor or a specialist. Anybody goes by reputation. So buying a firm gives you a long time advantage. And the local presence of American PEs and SCEs gives them confidence that the work is done from India. There are people who are monitoring and checking in U.S. and ensuring everything falls as per courts of American standards. So this is a win-win for both sides.

Thank you, sir, and best wishes to you, sir.

Thank you.

Thank you. The next question is on the line of Samar Singh from PKF Capital. Please go ahead.

Yeah, thank you for the opportunity. Last year, last quarter, we had this FX M2M loss. Has there been either a loss or a gain in this quarter?

This quarter, there was a gain.

Could you quantify that?

Because the dollar has been more or less stable, rather little rupee has got strengthened a bit, so there is some gain.

Could you give him the amount, OPM?

It's about a crore, 1.2 crores.

The second question was on Beryl. This $1 million order that we've got with Hillsborough County, is that a recurring order or is it just the one-time?

I don't have much knowledge about it. I had to ask our CEO, Prasad, but this is one thing which will be completed within six months to one year. So it will be spread across a period of 12 months from July.

And in barrel, I think last time you had mentioned that, you know, we need to do about $7,000,000 of revenue that will get us to about 8 to 10% EBITDA margin. Is that still the number that you hold? And, you know, by when do you expect to get that?

See, last year, they did about $5.4 million. Very, with a profitability of around 8-9%. So, this year, I think, again, they will be able to sustain a similar number because their workflow has impacted a little bit because of the disruption in their design team, which we are now building up. So, hopefully, this full year, again, they will close somewhere close to 500 million with an EBITDA margin of around 8%. And currently, just in the eight months of our acquisition, they made a marginal loss of $5,000, $10,000. So, that might fill up in the next remaining, this current financial year, that is the remaining nine months, and hopefully it will go into positive terrain from Q3.

So, the barrel sales issue is an internal issue. It has nothing to do with the fact that Florida residential permits are, I think, down about 10% YOY.

Which is 10% down?

Florida residential permits. So it's sort of the residential permit. So I'm just saying sort of demand issue, as far as that is concerned, was more of an internal issue, which led to the, you know.

Yes, it is a little bit of demand issue to the extent that the government funding has been stopped, if you remember. The American government funding shutdown, government shutdown has happened for four or five months in the beginning of the year. So that has an impact because these guys do more, mostly government funded projects. So they have some impact in the month from Jan to May. I think now it is again open. So, they are expecting the workflow to improve.

And last question, there was also a plan to sort of move some of their operations from the U.S. to India to reduce costs. Is that still the plan, or that is no longer the...

Yeah, no, that is the design part. That is the design part which we are planning to create here. And what is happening now is they are leaving the opportunity soon after the inspections and permits. In fact, the guy who is getting the permit and plan approvals, he can easily seek the design work also, which they are not able to do because of lack of manpower, which we are creating now in India. So, going forward, what they are leaving the work client at the permit level and approval level, they can continue to provide design level also once our team is in place. So, going forward, we are positive about Beryl's contribution. It might take another year.

So, the 10% margin that we have put in as the ceiling, that would be just on what kind of work that is doing today. But once you start providing the design services as well as you expect, that could go up.

Once the design services start in a big way, that can improve. The 10% can slowly move upwards. But currently, why I am saying is majority of their revenues are even today are from approvals, permits, and inspections. Nothing from design. Nothing means insignificant. So, $20,000, $30,000 a month, which can go up to $200,000, $300,000, $500,000 also per month, once the team is in place, because they have the contact. A guy who is going to ask them for a permit approval and inspections and insurance claims and all that, he will also be happy to get the design done in case they have the capability, which they don't have. So, that is what we have to fill in now. Once we fill it in, then their numbers will start growing up.

And that team is in place already, or the U.S.B. is still working on it?

Yes, we have seven people now here in India, and three there in the U.S.A., but they lost two strong hands in the end of November. So, we are now filling up that gap from Indians and local outside work. So, when you pay local outsiders, you don't make any money, because their costs are the same. So, until a team from India starts executing, you will not see the cost arbitrage.

Right. And you start and you expect that to start from next year onwards?

Yes, definitely.

Okay. That's it from my side. Thank you.

Thank you. Due to time constraints, we take that as the last question. I now hand the consent over to management for closing comments.

I thank MK Global and also all the participants who have shown interest in our company's quarterly performance. As we discussed, the future looks bright, and I hope things will fall in place as per our plans. And companies are definitely working towards improved efficiencies and improving the output of per employee through automation and other tools that are available. And definitely keep up the performance in the coming quarters. I hope so. And I wish you all a great evening. Bye.

On behalf of MP Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.