Netweb Technologies India Limited (NETWEB) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to NetWeb Technologies Q2F527 Earnings Conference Call hosted by ICIC Securities. 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 bypassing star then zero on the touchstone phone. Please note that this conference is being recorded. I now hand the contents over to Ms. Seema Nayak from ICSA Securities. Thank you, and over to you, Ms. Nayak.

Thank you. Good afternoon, everyone. On behalf of ICSA Securities, I welcome every time to Network Technology, Q2SY27 early school. We have the team's management team of network technology, led by CMD, Mr. Sanjay Loda, full-time director, Mr. Laveen Loda, PFO, Mr. Ankit Kumar-Finger, chief sales and marketing officer, Mr. Ridai Vikram, chief strategy officer, Mr. Mukul Keria, and head of IOTUS advisors, the IR advisor to network technologies, Mr. Sanjeev Sanjeev. So, without further ado, I'd like to hand over the floor to Mr. Sanjay. Over to you, sir.

Thank you, Seema. Good afternoon to all the participants. Before I hand over the call to Mr. Sanjay Lodha for the opening remarks, I would like to draw your attention to the safe harbor statement in the earlier presentation. I request each one of you to go through the disclaimer in that presentation before the meeting starts, so that you are aware of the same. Thank you, and over to you, Mr. Lodha.

Thank you, Seema and Sanjeev. Good afternoon, and a warm welcome to all of you to NetWeb Technologies Q2 Financial Year 27 earnings call. We are pleased to report that Q2 Financial Year 27 has been another record-breaking quarter for NetWeb Technologies, with our highest ever quarterly revenue from operations and profit after tax. Both revenue and profit grew four times year-on-year. H1 financial year 27 SPAT reached 222 crores, surpassing our full year financial year 26 SPAT of 206 crores in just six months. In Q2, financial year 27, revenue firm operations grew at a rate of 335.7% year-on-year to 1,323 crores, operating EBITDA increased by 334% year-on-year to 197 crores with a margin of 14.9%, whereas FAT rose from 348.8% year-on-year to 137 crores, translating into a margin of 10.2%. Our ability to sustain margins while scaling rapidly reflects strong execution and operational discipline amid rising demand for high-performance computing and AI infrastructure. AI systems remain our primary growth driver, contributing 773 crores or 58.4% of revenue from operations, Resisting a growth of 1,068.1% year-on-year, HPC and private cloud also delivered robust performance, contributing 248 crore and 245 crore respectively. Highlighting the strength of our diversified growth portfolio, as on September 30, 2026, our order book stood at 2,629 crores, with an additional L1 position of 653 crores, providing strong revenue visibility for the coming quarters. The quarter also marked a significant milestone in our journey, where it successfully raised Rs. 1200 crores through our first capital raise since listing in July 2023. We are grateful to our investors for the overwhelming response and continued confidence in our business, growth strategy, and long-term potential. Moving to the industry landscape, we continue to witness an unprecedented surge in global demand for AI compute, with India emerging as a significant growth market. The India AI mission represents a major structural tailwind for the domestic AI ecosystem with the potential to accelerate development of indigenous AI capabilities, expand access to advanced computing Government bodies, public institutions, and large enterprises increasingly view computing infrastructure as strategic infrastructure, prioritizing secure, high-performance systems that enable critical data and workloads to remain within the country while optimizing the AI token economics. Achieving cost-effective token generation requires more than access to advanced compute. It also demands strong engineering, system design, and solutioning capabilities. NetWeb has invested in developing these capabilities over the years, positioning us to address the evolving requirements of this market. Global service providers, CSPs, global cloud service providers, CSPs, data center operators, enterprises are expanding their GPU-intensive infrastructure to meet the growing computational demand for AI training, inference, and other AI-driven applications. India is emerging as an important destination for these expansion plans, creating additional opportunities across high-end computing ecosystems. These developments together, with growing need for indigenous computing capabilities and end-to-end technology stacks, are reinforcing the importance of sovereign compute infrastructure. With our integrated design and engineering capabilities, in-house manufacturing, and end-to-end solution deployment expertise, NetWeb is well-positioned to address these requirements. Our strategies across supercomputing and private cloud have also delivered excellent results, further validating our capabilities and market positioning. Furthermore, as National Supercomputing Mission 2.0 places greater emphasis on designing and building compute infrastructure in India, and HPC adoption across enterprise, indigenous design and manufacturing, along with bespoke solutioning, are becoming increasingly important differentiators in the high-end computing landscape. We believe these structural drivers will support a sustained growth cycle and high-end computing space. Our active pipeline of approximately 11,152 crores represents the total value of business opportunity currently under pursuit and serves as an indicator of demand visibility. It is important to distinguish this pipeline from our total addressable market, i.e. TAM, which is significantly larger and represents broader market opportunities available to NetWeb. Together, these forces reinforces our confidence in growth opportunities ahead. Beyond our core business, we continue to explore emerging opportunities in physical AI and quantum computing, leveraging our technological expertise and established capabilities. As communicated earlier, we are advancing initiatives in both these areas. In physical AI, we are developing capabilities across technology stack, leveraging our AI systems, digital twins, in-house software support, training, simulation requirements. In quantum computing, we have commenced R&D on quantum simulators and emulators and are engaging with institutions, hubs, and startups across ecosystems. Further strengthening our focus on technology development, our board has also approved the establishment of a wholly owned subsidiary of NetWeb in Taiwan for advancing our R&D efforts. This is an important step towards deepening R&D in IT hardware and strengthening our technological capabilities as India's leading technology OEM. We believe this initiative will further support our pursuit in innovation and our ambition to design and manufacture advanced computing solutions in India. As a leading Indian OEM in the high-end computing solutions, we continue to invest steadily in innovation and chip-agnostic design perspective philosophy for alignment with Make in India Vision, a stronger balance sheet with our recent capital raise, and a robust order book, position us well to capture growing demand for high-end computing, deliver sustainable long-term growth, and create lasting value for stakeholders. I will now request Ankit to take you through the financial performance in great detail. Thank you.

Thank you, Mr. Loda. Good afternoon, ladies and gentlemen, and thank you for joining our earnings call. Before we open the floor for Q&A session, I would like to provide a brief overview of our financial performance for the quarter and the first half of FY27. I trust you have had the opportunity to review our earnings presentation and press release. Let me begin with our quarterly performance. Revenue from operations for Q2FI27 stood at Rs. 1,323 crore, registering a year-on-year growth of 335.7% and a quarter-on-quarter growth of 61.4%. Operating EBITDA for the quarter stood at Rs. 197 crore, increasing 334% year-on-year and 63.7% quarter-on-quarter. The operating EBITDA margin stood at 14.9%, reflecting our ability to sustain profitability. Profit after tax for Q2FY27 stood at Rs. 137 crore, growing 334.8% year-on-year and 60.2% quarter-on-quarter. The pat margin for the quarter stood at 10.2%. Moving to our first half performance, revenue from operation for H1 FA27 reached Rs. 2,143 crore, representing year-on-year growth of 254.2%. Operating EBITDA stood at Rs. 323 crore, growing 257.7% year-on-year, with a margin of 15.1%. PAT increased 258.5% year-on-year to Rs. 222 crore, with a margin of 10.3%. Our first half performance reflects strong business momentum, supported by robust demand across our core segments and disciplined execution. Notably, our H1 FY27 pad has already surpassed our full year FY27 pad, underscoring the scale of our growth. Turning to our balance sheet, we achieved a zero net debt position during the quarter with net cash position of Rs. 14 crore as of September 2026. In addition, the company had approximately Rs. 403 crore unutilized from the QIP proceeds. This improved financial position, supported by our recent capital raise, provide us with greater financial flexibility to fund our growth plan. Our cash conversion cycle stood at 94 days, with receivable days improving to 62 days, while inventory days stood at 117 days. The relatively higher inventory levels are intentional and reflect our preparation for executing the order book of approximately 2,629 crore as of September 26. Given the strong global demand for high-performance computing and the strategic performance, the importance of these deployments, proactive supply chain planning, and availability of critical components are essential to ensure timely execution of customer orders. Our return on equity and return on capital employed stood at 31.4% and 38.6% respectively. These ratios reflect the impact of QIB proceeds on our capital base. Coming to the utilization of QIB proceeds, we had utilized Rs. 767 crore of the proceeds as of September 2026. We remain grateful to our investors for their overwhelming response to the QIP and their continued confidence in NetWeb's growth strategy and long-term potential. To conclude, our growth priorities remain firmly on track, supported by a healthy order book, a strong pipeline of business opportunities, and sustained demand for high-end computing solutions. We remain focused on scaling our business, executing customer order efficiently, and maintaining operating discipline and profitability. With that, I would like to conclude my remarks and invite the moderator to open the floor for Q&A. With this, I now hand over the call to Seema.

Thank you.

We can now open the floor for questions.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and minus on the touch on the telephone. If you wish to remove yourself from the question queue, you may have a star and two. 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 comes from the line of Mohit Bansal with Eternal Access Capital. Please go ahead. Mr. Bansal, please go ahead. Mr. Bansal, please unmute yourself and go ahead. Since there is no reply from the line of Mr. Bansal, we will move to the next, that is, Hi,

I just wanted to ask the basic question about how fast is overall network growing outside its top 5 customers? So we see a lot of growth in the top 5 but not very clear about how you are seeing the growth outside of the top 5 customers.

Let Ankit answer it, because I think the presentation mentions that very clearly.

So, if you see, we had been adding our new customers. We added 49 new customers in this H1, and if you put three and a half year as a period, we have added close to like 500 new customers to the order book. And this is a very important metric that we always report in our presentation because it accounts for like 8% to 9% new customer being added to our revenue book. So having said that, the company has been consistently working on and growing on the customers beyond top 10 and top 5. And even these top 10 and top 5 customers, these are not a static customer. There is a pool of 25-30 customers which keeps on changing. So, having said that, you will see that we are consciously working on the customers' anti-preservation.

Just to add on to what Ankit said, so while you are seeing one particular static top 5, top 10, but in every quarter, every year, those change. So, it is not that the business in the medium term is concentrated to these 5-10 customers, there are new customers who come into those top 5. So, that's churn which happens. So, 25 to 30 customers probably have churned over the last 2-3 years to take the top 5, top 10 place. Hence, while in statistics it looks like a very heavy concentration, actually it is not.

Okay. All right. Thank you. Mr. Mehta, are you done with the questions? Thank you. A reminder to all the participants, please to stick yourself to two questions. Next question comes from the line of Chetan from Bank of America. Please go ahead.

Hi. Congratulations, team. Great set of numbers. The two questions that I have is the first one is around if you can detail a little bit more about your plans in the Taiwan subsidiary. What do you intend to do there? Are you planning some sort of a partnership with some local company over there? Some additional color would be really helpful. And then the second one that I had is, what is the progress on the next set of servers that is Vera Rubin? Does our order book already have Vera Rubin's in it, or does that form part of the next orders that we'll start receiving? Thank you.

Thank you. Thanks for your question, actually. So, on the final subsidiary, I would like to state that basically NetWeb has decided to set up its 100% fully owned subsidiary. There is no partnership or there is no basically with somebody actually. This is primarily completely owned by NetWeb only and this is primarily only for R&D purposes actually. Because basically we have, you know, basically since we are a company which is growing at a faster rate And new products are always there in pipeline and with NGVD and basically all other solution providers introducing products at a very fast rate. So basically we need design engineers and all that. So getting resources sometimes in India becomes a challenge actually on the hardware side of it. So that's the reason that primarily purpose is to have more, to hire more manpower so that basically they can be available locally in Taiwan. And since those kinds of people are easily available in Taiwan, so basically so that those resources can be used for our R&D facilities, this will only enable and help us so as to speed up our R&D capabilities. This is the only purpose of that subsidiary in Taiwan. The next question I will ask Hirdet to answer.

So, the plans are very much intact, and as you have seen in the past also, we have always kept our product launches matching with worldwide timelines. So, the same is the process that we are following in case of Vera Ruben as well. So, this will be, I mean, commercial for January. So, we will be planning to basically start offering this product to be sold to the customers by January. So, we will see if we can pull in the timelines.

Thank you so much. This is really helpful, and the Taiwan hiring bit that you plan to do is definitely encouraging. Much appreciated. If I can flip one more, the inventory that you have currently, the 1,900 crores bit, it's fair to assume that we will execute that within Q3, Q4?

Yeah, yeah. So, this inventory actually is to support the order book only. And, yeah, they will be churning from this inventory, definitely.

Perfect. Sure. Thank you so much. All the best.

Thank you. Next question comes from the line of Vinay Menon with Monarch Capital. Please come in.

Hi, sir. And congratulations on great several numbers. A couple of questions from my side. Gross margins, you know, have declined, and I agree that there are, you know, component prices are up, and that is adding pressure. But what base can we look for, you know, in the next few quarters, and where could we see a steady state in terms of gross margins?

So, I think gross margin is very difficult to monitor on a quarter-on-quarter basis. I think it would be good for us to look at a full year basis, and I think we will do, we guide on EBITDA,

So, Vinay, I would also like to add here, so it is important to see the EBITDA framework which is being followed. So, when we enter into a very large scale deal, so the profile is inherently different with the small deal. So, cross margin becomes a game of different deal makes which cannot be judged on quarter on quarter basis. But the EBITDA framework When there is a large deal coming in, with whatever gross margin, there is obviously the overhead cost structure do not grow in that proportion. So there is obviously a leverage which comes in when we do large deals, and that's why the company has showcased operating EBITDA margins to remain around 14%.

And one more question. We've seen NeoCloud like, you know, Yota, E2E announcing KPEX for 27 and even beyond. And we also saw an RFP from CDAC for some about 10,000 GPUs. Are these part of our current pipeline or do we see any additional pipeline and order book coming from, you know, these kind of dealings where we could play a major role?

So, thank you for pointing it out, but basically all the names which you mentioned, all our customers, and they are very much in the order book in the funnel everywhere, but basically we don't specifically state the numbers of the orders or the quantities of particular customers, because basically I hope you'll understand the reason for that, but still you can see the order book is still after execution of such a robust revenue this quarter, still the order book has also increased. It was 2,500 crores last quarter. It is 2,600 crores. If you add the, basically, the L1, it would be around 3,100, 3,200 crores approximately, which is substantially large order book.

Okay. And one last small question, sir. In terms of NFM 2.0, when can we start expecting some orders from it? Maybe early 27?

Yeah, you are right.

Okay. Thank you. Thank you, and all the best. Thank you so much.

Thank you. Next question comes on the line of Zaif Sheik with Atiti Pirla. Please go ahead.

Hi, thank you. Thank you for the opportunity, and a great set of members. Congratulations on that, sir. So, we'd like to ask about the Taiwanese subsidiary that you're setting up. Will this kind of enable us to kind of put our company on the same set as it of the Taiwanese sodiums? Will we be able to launch out new products at the same pace as it of Vivian or Percatron, etc.? Second question, I'd like to follow up on the working capital cycle, but first we can answer this question.

I didn't get you a second question. What is the second question?

The working capital, networking capital. So, how is the networking capital expected to shape up in the coming year?

So, basically, first I will answer the first question. I hope you will appreciate that, that basically, company has been very clearly a make in India company, We want to focus on manufacturing in India itself because the company is a 25-year-old company and from very beginning, since inception, the idea has been to design, develop, and manufacture in India. So that was the idea, actually. And plus, basically, there are two major differences between the ODMs and NetWeb. Primarily, one is that we are India-focused. The second is that we are not box producers. Most of the ODMs, which you mentioned, they primarily manufacture So, we don't intend to become an ODM kind of, basically, the name which you mentioned, because they are a different kind of company, we are a different kind of company. Primarily, the Taiwan subsidiary will be only used for R&D purposes, that is only to speed up the R&D efforts from our side, and you know that most of the technology providers, they also We also have basically the main R&D centers in Taiwan. So being nearer to them also helps actually. So these are the reasons why we have this. But primarily the idea is only R&D at this point of time. Thank you. The second part, I will give you an answer.

In regards to the networking cycle, for the September was 94. And what we anticipate that our cash conversion cycle will operate Between 90 to 110 days, considering how the quarter growth goes in. So, 90 to 110 is the range where our working capital cycle will operate.

Sir, I think last year we kind of operated at some 14 days networking capital. So, is that a one-off thing? And every year it is expected to operate in the same 70 to 80 or 90 days range?

So, yes, if we talk about last year, it was 84 days, the cash conversion cycle. It has gone up because in this year, we had been doing the efforts on the inventory days, considering the large order book we have in hand. So, even going forward, we will operate in this range only.

Thank you.

Thank you. Next question comes from the line of Sandeep Pisha with Equalist Technology. Please go.

Yeah, thanks for the opportunity and congratulations for a strong quarter. Just the gaining traction from the Chinese memory chip maker like CXMP or YMTC, if this scales up, are we ready in terms of making a schematic changes in our design of the server to incorporate this kind of a new partnership?

Thanks for your question. So, currently, the architectural changes are not very swiftly moving towards the technology that you are referring to. So, that is going to take some time. And definitely, this is also important to share with you that in case if there is some architectural change which happens very shortly or very fast, then we will also be able to adapt to it. And there will be other comparable or competing players who will also be able to offer the platform. So, I think for now, we are having a good roadmap available, you know, which will serve at least for two to three years in terms of, you know, introducing the new product lines and even catering to the current one. So, that means we are confident of the product line that we are carrying.

Okay, thanks. And just a related question, to optimize the token cost, world over, some of the Fortune 500 clients are preferring multi-model architecture, where they are using frontier models, small language models, open source models. So, does that also changes our server design in terms of incorporating various model options? And does those kind of server demand is increasing even in India?

One thing which is very important, which you must have also noticed by now, which we have always been highlighting, that we have always been focusing on all the layers of our solution. And, you know, when we design the solution, we focus on providing compute, interconnect, storage, and, you know, the layer above that, which includes our cloud stack also. And by virtue of that only, we have been able to achieve better token economics for our end customers. So, it is not basically demanding the architectural change in the server architecture. Rather, it is demanding a better design solution, which includes, you know, optimized design and going by the reference architecture of NVIDIA chips. So, that's how we achieve better token economics, and we have been helping our customers based on that only. So, I think we have been able to justify whatever token maps we have to give to our end customers. We have been able to justify that. Based on that only, adoption of our platforms are happening across multiple customer segments.

Okay, thanks. And just last question, in the AI-led order intake, is it the traction is also coming from the private organization within India, or is it largely skewed towards government? And what is a typical average size of AI-led server demand or order?

So, basically, that question is very varied, actually. It can lie from somewhere between 5 crores to basically maybe 1,000 crores, actually, as regards to the size of the order is concerned. Basically, to answer the first part of the question, there is a major thrust from the private bodies on the demand. So, basically, government demand as well as private The private demand, both are really in buoyancy, and basically, it's no more primarily AI is a government play. The private demand is also, enterprise demand is also very heavy.

Thanks, all the best.

Thank you. Next question comes from the line of Pradeek Singh with IIFL Capital. Please go ahead.

Hi, thanks for the opportunity and congrats to all of the certain members. My first question is about poets, so how should we be looking at it, given that the bulk of the strategy quarter of 52 billion is now largely behind us, maybe 3-4 billion is left. I understand that we should not be looking at the business from a technical perspective, but just to...

Yeah, your voice is not... We are not able to understand. Can you speak clearly?

Can you speak a little louder? We cannot hear you.

Is it better now?

Yes, yes, please come in.

Yeah, so I was asking how should we look at 2H now that the bulk of the strategic order of around 22 billion is behind us. I understand that we should not be looking at it from a quarter-to-quarter perspective, but just so we can get a sense. 2H revenue would likely be higher than 1H as it has been in the past, or we can see a change of thinking?

So, basically, the thing is that I can only tell you, if you see the order book, that will itself give you an indication how the 2x will look, actually. So, basically, I leave that calculation on your end, but I can only assure you one thing, that we are targeting to achieve 4000 crores of revenue this particular financial year.

Understood. And can we get a sense as to which segments are driving the audiobook? So, is it largely AI or it's broad-based across all segments?

I think you are not audible.

Okay, sorry, I'll join back the queue.

Thank you. Next question comes from the line of C.A. Garvit Gowell with Serene Alpha. Please go ahead.

Hi, I'm audible. Good evening and congrats for a good set of numbers. I wanted to understand on the growth perspective in NABY28 and onwards, I understand that your pipeline is 11,000 CR plus, but in order to grow at the higher base, the kind of execution people have delivered in NABY27, it's actually mind-blowing, right? So on that basis, to continue a growth of 30-35% in 28 and onward, we need to close a significant portion of the pipeline into confirmed order book by 27. So, can you put your view on that, like, where we are in the terms of closing this pipeline into confirmed orders, if you can put some probable number, what kind of order book it will look like at the end of financial year 27?

So, Garver, I think you are following the company for the last five years, I think so. You might have seen basically whatever we have committed, we have delivered. Okay, if you see the base, which was basically 400 crores while we did the IPO, okay, and basically and today what I am suggesting that we will be doing around 4,000 crores. So basically that's 10 times actually. And we have always constantly kept our growth numbers around 30 to 40 percent CAGR kind of growth which I promised year on year. And seeing the current AI demand and the kind of technology innovation which we are trying to do, the kind of unique Any proposition which network brings on the table in the Indian AI ecosystem, definitely we are very confident to maintaining that growth for at least next two to three years actually. And you see the pipeline has been also very robust. It has been clearly growing at a constant pace. But basically, if you tell me that in a minute it will change something or basically the conversion ratio will change, these things doesn't happen this way. It Basically, it happens only gradually. We have a conversion ratio of around 60% of the pipeline, which basically, and the pipeline keeps on adding every day. So, that gives us the confidence that basically we'll keep on growing at the same rate of 30 to 40%.

Also, just to add here, just let me, Sanjeev, let me add here. So, if you look at last quarter's order book, after was about 24, 2500, and after billing about 1300 plus clause, we are actually above the last quarter's order. And the second thing is that we cannot have a confirmed order for the whole of next year right away, right? The conversion happens gradually, but the strike rate is 60%. And we are sitting on the pipeline of more than 10,000 crores. I think it's mathematically you can yourself kind of, you know, do a model for yourself.

Understood, sir. And secondly, I wanted to know your view. You might have addressed it in the opening remarks to an extent. But I wanted to understand from the perspective of AI capex that is happening in the global market, if I look at the rising cost of capital, the capital that was available to these players maybe six months or ten months ago, the cost of that capital has increased significantly now. So, are you people hearing any kind of hindrances or any kind of reduction in the capex by these hyperscalers as well due to rising cost of capital, sir? I just wanted your view on that.

The problem is different that basically as if the demand increases, definitely basically the pricing and the cost of capital, the cost of the memory prices have gone up by 200% or maybe even more than that. But do you think that has impacted the demand? That has not impacted the demand. And plus, please keep in mind my complete business is not dependent upon the overseas kind of a demand which is coming to India. Basically, we have a very, Very balanced kind of a demand from various areas, but my personal view is that the definitely cost of capital and all those things basically can really, will go up, because the demand will go up, but that will not deter the demand.

Got it. Thank you, sir, and all the best for the future. Thanks.

Thank you. Next question comes from the line of Lishita, and a reminder to all participants, please just speak to yourself with your questions.

Yeah. Am I audible?

Yes?

Yeah. Hi. So, like, we have a very good order pipeline of around 10,000 km. Our conversion ratio is also of around 60%. So, you saying that we can achieve a 30-40% CAGR, is that conservative? Because from where I see and from how much we can convert our pipeline, we can easily achieve, like, around 60%, 60% growth. So, are we being conservative?

We can't hear you anymore.

Hello. Hello. Hello.

Have you completed your question?

Yeah. Am I audible?

Yes, Mr. Zipa. You're audible.

Yeah. So, I just wanted to understand if we are being conservative when we will grow 30-40%.

I cannot give a guidance on a guidance. My guidance stands where it is.

Okay, okay. And my next question is, I just wanted to understand the execution timeline of our current order book.

Basically, it depends. It is 10 to 16 weeks.

I'm sorry, 10 to 16 weeks.

That's the standard timeline which we have, not of the current order book. That's the standard. Any order, that's the basic execution timeline we have.

Okay, okay. Got it. Thank you.

Thank you. Next question comes from the line of FEMA.

Congratulations on our report, Porter. My question is on the order timeline. If you could please give a breakup of the pipeline between India, AI, sovereign AI, and organic, that would be helpful. And what is your outlook two years down the line?

Thank you for your question, actually. But unfortunately, we don't share the breakup of the order book, actually. But basically, I can tell you it's a very healthy mix. The enterprise is also very, very active these days. And basically, the demand is from the government and enterprise both are mixed together. And apparently, if you ask me in today's order pipeline, I can only tell you that maybe enterprise will be more than the government at this point of time. But basically, this keeps on changing quarter-on-quarter actually, and so that I will not be able to mention to you. But other thing, basically, as regards the growth is concerned, I already indicated to you the number which we are targeting this year, and we are also, we have planned to grow by 30%, 30-40% CAGR continuously for next few years now. So we are very confident about that.

And what percentage of USM 2.0 outlay are you targeting?

Actually, NSM 2.0 is basically, we are definitely targeting a good percentage, actually more than half of it we should be targeting actually, but it will not come as in one go, because basically that's a five-year program, so that will come as slowly as it comes, but we will be very well positioned, because a lot of Indianization and local manufacturing and all these things have been given weightage under that program, so as soon as it rolls over, I think that will be, we will repost.

Got it. Thanks for taking my question.

Thank you. Next question comes on the line of Tivesh Mehta with Invesco India Mutual Fund.

Thanks for taking my question. What I wanted to understand is actually two things. First is, in my understanding, I think beyond the working capital of 90 to 110 days which we need, A lot of orders would also require us to block a certain amount of cash in terms of fulfilling that order, right? So any color as to how that would have impacted our cash flows in the recent times, I think that's the first question. And the second part is, take for an example, hypothetically So in your understanding, such large orders, how fast do they get executed? Do they get executed 10,000 GPUs in one single slot? Or do they go to a single vendor and then that vendor buys from you? In your understanding, typically, if there is an open tender of something similar, how would the timeline flow down, any color on that? Those are the two questions.

So, as far as the first question is concerned, regarding the blockage of any cash flows, we haven't seen any such situation because if you see, there is a significant improvement in the receivable days in this quarter. So, all our debtors that is being reported are all very healthy and top-notch, and there is no such case of any bad debt or being elongated beyond one to ten-day cycle. So, there is no such as such on these cash flows. Whereas, inventory is concerned, it is a bit intentional that we are preparing for the upcoming orders. The order book is significantly large. If you see, it's of 2,600 crore. So, the investment is going basis the supply chain demand and the kind of lead time which has gone up. So, in order to secure the execution of these orders, we have done so. So, there is no any pressure on that in terms of anything.

Thanks, sir. But when I look at our presentation, we give a specific disclosure called free cash in the balance sheet in the presentation. And when I look at the same number, which is in our actual BSc filing balance sheet, both numbers are different. So, there is a calculation behind this thing which might not be apparently appearing on the balance sheet phase.

So, there are two components. One is the free cash that we have. So, there are some bank deposits which do not primarily appear in the e-cash, but they sit in every bank deposits which are of slightly longer days. So, it appears in a classification of bank balance and other than cash and cash equipment.

The last part of the difference is because of the money which was raised in the QIP and it is sitting in the, that is also, that is 400 crores and the rest is on certain bank guarantees and deposits. So it's a mix of both. But large part of it is because of the money which was raised in the QIP and not yet utilized. So that cannot be considered as free cash.

Yes, sir. Thanks, sir. And that's the last, the CDAC question. That's it.

The second question, just to answer your question, that what CDAC has rolled out is an opportunity which is for request for empanelment. And under this RFP, they are going to empanel CSPs who are going to ultimately offer them the count of GPUs that they are targeting to have. When this is definitely not going to stop at 10,000, they are going to demand more because this This is the kind of requirement that, because this is on behalf of India AI, by the way. This is not basically on CDEC's own behalf. That is one. So, yes, this is an opportunity which will give us the, you know, space to basically create more opportunities for ourselves also. Because we are already in touch with those CSPs and many of them are already served by us. So, in fact, there are certain new players which, you know, who will also be participating and we are in touch with them. So, that way, we are pretty much on top of it, and this is definitely going to result into, you know, more pipeline addition for us.

Okay, just a clarification on this part. So, in your understanding, is it the case that the existing capacity for NDII mission, which was sitting with those CSPs, is largely now utilized, and do you think that CDAC will roll out 10,000 clusters in a single shot and then increase, or?

You are a bit confused, actually. Basically, there are two parts to it. One is that the earlier India AI RFP, which was there. So, actually, CDAC is doing the RFP on behalf of India AI. Okay, this is not CDAC personal requirement. This is India AI requirement. And the earlier RFP, which they had done, when people had offered GPUs, actually, those were being utilized. But currently, what is happening is that the rates, the international rates of the GPUs per hour has gone up. Hence, basically, the NDII is not able to get the GQs at the older rates. So, hence, they are trying to come out with a fresh RFP, which they have just rolled out, which people will be bidding, and definitely, it will be prevailing as per the market rate. So, definitely, as soon as they offer the GQs, they are getting allocated. So, various CSPs will definitely have installations, and they can place orders. They have an option of placing orders on us, and as the orders are placed, we will be delivering. So, this is how this will work, actually. This is not CDAC trying to deploy these many clusters.

Okay. Thanks a lot. Thank you.

Thank you. Next question comes on the line of Mansimur Singh Sethi, with Sethi Capital.

Am I audible? Okay. So, in the presentation, I have noticed that SDA and IDFC First Bank are listed for the first time as customers. I just wanted to know that since you mentioned in the opening remark that the data sovereignty and data localization, especially in the Indian banking system and financial service is key, so could be the banking and the BFSI segment emerge as a significant growth driver for network over the coming years?

Very good observation, sir. Thank you so much.

Hello.

Very good observation, sir. Your observation is absolutely correct.

Okay. Thank you, sir. So, my second question with respect to that is, recently, you know, NVIDIA has launched supercomputers in a computer, in the sense they are replacing the traditional PCs and laptops. So, I just wanted to know how does NetWeb view this emerging opportunity, and are you evaluating or planning to expand into this segment?

So, basically, NetWeb is a very, very, very focused company into the data center and enterprise workspace. We normally don't get into client devices and selling boxes. So, I don't think the areas which you are mentioning, it's not very clear to me what exactly you are mentioning, but basically, we don't intend to get into laptop space and the client space at all. Okay.

So, that's all and all the very best to you and the team.

Thank you. Thank you.

Thank you. Next question comes on the line of Abhinay Menon with Munat Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. One follow-up. You know, employee costs have come up on a few on a few bases. And if I look at last five, six quarters, this number is increasing. Is it because we are adding talent or is it maybe if you can do a breakup of ESOP costs also in that, that would be helpful?

So, Vinay, there are two, three factors behind this increase in the employee benefit expenses. First is, this quarter is basically a quarter where the increments have been coming in as a cost of areas. Secondly, there is always a variable pay which comes in line with the growth that we do for the quarter. So, it's a bit variable because there is a provisioning of incentives and all which goes in. And third, lastly, yes, there is increase in the headcount. If you see, we have grown by 120 plus employee strength as compared to last year's quarter headcount. So, yes, these are three factors. Whereas, as far as ESOP cost is concerned, for this quarter and sequentially the erstwhile quarter, there was not significant ESOP cost because the tranche which we had given at the time of before the IPO, they got vested fully last year itself. So, there is no much ESOP cost. Whenever the new ESOP schemes are being distributed, then it will have an impact in this area.

Okay. Okay. Thank you. Thank you and all the best. Thank you, Sipu.

Thank you. Next question comes on the line of Pradeep Nagori, an individual investor. Please go ahead.

Yeah. Thank you. Thank you for this opportunity. First, congratulations, Sanjayji, and the entire team for, you know, super numbers. Most of my questions are answered, but, you know, I would still like to ask one particular question, which is from a future perspective. On your presentation, you mentioned that the new opportunity that we are trying to tap is physical AI and quantum. Could you give me some more details in terms of what exactly we are doing in this space and how large this opportunity can be for network in the next couple of years?

So these are the new areas, as you know. These are the areas which are developing very well, and we are expanding into R&D. Actually, at this point of time, we are not willing to disclose more about exactly what we are trying to do, because as you can very well understand, still we have our own reasons, actually, wherein we are not really talking much about it. But some brief information, which I have already shared on my opening remarks as well, that basically is covered under that.

But how, I mean, from a timeline perspective, how do we see in terms of, you know, that opportunity getting monetized, meaning like what, next one year, two year, three year? How far your estimate is in terms of monetizing that opportunity?

I think this is just presently in an initial development stage, and I believe as and when we believe that we are ready to envision the exact numbers, we'll get back to it. I don't think we want to speculate on how much we can do at this point in time.

Okay. So, just last question. You know, during a short period of time, like, you know, if you look at YOY numbers for both H1 and the quarter numbers, H1 numbers are growing by about two and a half times, and Q1, Q1, I mean, YOY quarter numbers are growing by about 3.3 times. But there is, it seems that there is no operating leverage that is kicking in, Because the FAT numbers or the operating margin numbers more or less remain in percentage terms exactly the same. So, I mean, I would assume that when such growth is coming in a short span of time, there would be some operating leverage that would be coming in.

So, you will appreciate that with the scale of growth which we have seen, obviously the size of the businesses also increased. The whole structure of the customer profile has changed. So, for us to be able to maintain EBITDA is something which we are really focusing on. I think we have always very clearly mentioned that we will maintain our EBITDA and PATH and I think we continue to do that. Ankit, you would like to add something?

So, yeah, so if you see the revenue and PAD both have grown four times if we compare with the YOY numbers, so having said that with this scale, maintaining the EBITDA margins, what we have said that 13-14%, we have slightly crossed that in this H1, but not to be quoted for the entire year, but yes, the EBITDA framework while maintaining this large scale is what we have been appreciated of.

And also, you appreciate that we are a technology-heavy company, and we have to keep reinvesting in R&D, and we monetize all the R&D costs. So, for us to be able to keep developing new products coming out in the market to continue to remain relevant, I think this is a very speed stop, and none of our competitors are even close to what we earn. So, I think we are happy to be with this as long as we keep getting the lion's share of the business.

Great, thank you so much. If I could just push one more question, I mean, would you see any other competition for us in India in the space that you are?

That is a, we have no idea about that.

Okay, thank you so much.

Thank you. Next question comes from the line of Basanth Bansal with NBG Investment, Tishkavad.

Yeah. Good afternoon, sir. From the results, from your opening remarks, and from the question-answer, it looks that everything is good. So, what are the concerns and challenges that makes you worried, more particularly given the fact that the AI sector itself is, has a lot of concerns?

So, basically, in that regard, there are two, two, basically, you can see the glass is half, half full or half empty, actually. To us, it looks, basically, in my view, AI sector doesn't have much challenges. Definitely, any sector which glows at such a fast rate, definitely, more eyebrows are there. People will think about it. I personally feel AI at all the completely three areas we work into. One is the supercomputing. Supercomputing is an area which we are working for 25 plus years. And basically, cloud, I will not, SCI, we are working for 10 plus years. AI, we are working for 15 plus years. So we have seen the entire, basically, entire journey of the complete technology development. So we are very robust and we completely feel that the industry seems to be robust to us and we feel that this will keep on growing and these small concerns will keep on coming and up and down. They are more of an investor-related concerns. I personally don't feel there are any fundamental issues with the AI demand or something. The way the AI adoption is happening, the use cases are increasing day by day. It's entering into normal person's life actually. So, I personally feel that this is only a booster. I don't feel that there is anything negative about AI.

This has just started, I mean, as of now. This is not basically even the mid of the story. This has just started. So, you know, the way token consumption is going up, so you will see that, you know, there is a lot of headroom for AI as a technology to grow in coming years. So, I think there is nothing that, you know, first of all, concerns Thank you, sir.

This is very helpful.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.